CFPB extends GSE Patch

Agency Rule-Making & Guidance CFPB GSE Patch Qualified Mortgage Mortgages

On October 20, the CFPB issued a final rule extending the expiration of the GSE Patch until the mandatory compliance date of final amendments to the General Qualified Mortgage (QM) loan definition in order to facilitate a smooth and orderly transition away from the GSE Patch. As previously covered by a Buckley Special Alert, in June, the Bureau released two Notices of Proposed Rulemaking (NPRM) to address the January 2021 expiration of the GSE Patch for the QM Rule. The first NPRM proposed to remove the General QM loan definition’s 43 percent debt-to-income ratio (DTI) limit and replace it with a price-based threshold and the second proposed to extend the expiration of the GSE Patch.

The final rule replaces the original expiration of the GSE Patch (January 1, 2021) until the mandatory compliance date of the final amendments to the QM loan definition. The final rule also provides that the current QM definition “will be available only for covered transactions for which the creditor receives the consumer’s application before the mandatory compliance date of final amendments to the General QM loan definition in Regulation Z.” Notably, the NPRM for the new QM loan definition proposes an effective date of six months after the final rule is published in the Federal Register and the rule has not yet been published; it does not discuss a mandatory compliance date.