Yesterday the CFPB released ANOTHER final rule that amends the rules they issued in January. The final rule addresses, among several other things, the “eligible loans” exception under the QM provisions (also known as “the patch”). Below is some information from the new final rule regarding eligible loans. We will be discussing implementation aspects of the ATR/QM rule in excruciating detail next Thursday if you want to learn more about how this is really going to work . We will also discuss the CFPB’s recent amendments.
The temporary exception from the QM underwriting criteria (monthly payment, income or assets and debts, and DTI) requires that the covered transaction meet the QM product requirements and be an “eligible loan.” An eligible loan is a covered transaction that is eligible to be purchased, guaranteed, or insured by Fannie or Freddie, HUD, VA, USDA, or RHS except with regard to matters wholly unrelated to ability to repay.
The amended commentary to the rule indicates that the loan must be eligible, including satisfying any requirements regarding consideration and verification of a consumer’s income or assets, credit history, deb-to-income ratio or residual income, and other credit risk factors, but not any requirements regarding matters “wholly unrelated to ability to repay.”
Wholly unrelated are those matters that are wholly unrelated to credit risk or the underwriting of the loan, which may include:
- Status of the creditor rather than the loan
- Requirements related to selling, securitizing, or delivering the loan
- Any requirement that the creditor must perform after the loan is sold, guaranteed, or endorsed for insurance such as document custody, quality control, or servicing
Confused yet? Join us Thursday, July 18. We’ll try to clear it all up!