Performance Requirements – In order to become Seasoned QMs, loans would have to meet certain performance requirements at the end of the seasoning period. Portfolio Loan – A loan generally would only be eligible to season if the creditor holds it in portfolio until the end of the seasoning period. The proposal would not require the creditor to use appendix Q to Regulation Z in calculating and verifying debt and income. Verify the consumer’s debt obligations and income.The proposal would not specify a DTI limit. Consider the consumer’s DTI ratio or residual income.Underwriting – For a loan to be eligible to become a Seasoned QM, the creditor must: The total points and fees do not exceed specified limits.The loan term does not exceed 30 years and.The loan has a fixed rate, with fully amortizing payments and no balloon payment.Product Restrictions – A covered transaction would have to meet the following product restrictions to be eligible to become a Seasoned QM: Safe Harbor – Under the proposal, a covered transaction would receive a safe harbor from ability to repay (ATR) liability at the end of a 36-month seasoning period if it satisfies certain product restrictions, points-and-fees limits, and underwriting requirements, and it meets performance and portfolio requirements during the seasoning period. The comment period for the NPRM expires 30 days after the date of publication in the federal register, which is expected soon.The CFPB’s primary objective with this proposal is to ensure access to responsible, affordable mortgage credit by adding a Seasoned QM definition to the existing QM definitions.
On August 18, 2020, the Consumer Financial Protection Bureau (CFPB) published a notice of proposed rulemaking (NPRM) that creates a new category of Qualified Mortgage (QM), a seasoned QM (Seasoned QM), for first-lien, fixed-rate covered transactions that have met certain performance requirements over a 36-month seasoning period, are held in portfolio until the end of the seasoning period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements.
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