CFPB Proposes New Category of Qualified Mortgages

The CFPB proposed amendments to Regulation Z ("Truth in Lending Act") that would establish a new category of "qualified mortgages" ("QMs"); i.e., mortgages as to which a creditor may receive liability protection.

The new QM category, "Seasoned QMs," would be defined as transactions in which the loan (i) is secured by a first lien, (ii) has a fixed rate with payments that are fully amortizing and non-balloon, and (iii) has a term that does not exceed 30 years. Additionally, the transactions must satisfy points-and-fees limits and underwriting requirements over a "36-month seasoning period." Seasoned QMs would be limited to covered transactions that have no more than two 30-day delinquencies and no 60-day delinquencies, not including nonpayments resulting from a temporary payment accommodation.

The rule proposal follows two other recent proposals regarding QMs: one to amend the definition of "General QM" in Regulation Z and the other to extend the expiration date of the "Government-Sponsored Enterprise Patch," a temporary QM definition (see here and here, respectively).

Comments on the proposal must be submitted within 30 days of its publication in the Federal Register.