CFPB Puts Brakes on Mortgage Reform

February 24, 2021 at 9:49 am Leave a comment

Late last year, the CFPB passed a series of regulations making dramatic changes to the definition of qualified mortgages (QM) under TRID. Now, to the surprise of no one, the new leadership of the CFPB is holding off on these final regulations. This can get kind of confusing, so pay attention.

The regulations to which I am referring were finalized by the CFPB on December 10th of last year. One of the regulations created a new category of qualified mortgages, under which mortgages held in a lender’s portfolio for 36 months, which also met certain other criteria, would qualify as qualified mortgages. This distinction provides lenders with increased protections in the event the legality of the loan is challenged in a foreclosure. In finalizing the regulation, the CFPB had decided that regulations would not retroactively apply for this expanded QM definition, but also decided that the regulation would take effect March 1, 2021. In a statement yesterday, the CFPB indicated that it is going to let this regulation take effect, but that it is considering a new round of rulemaking that would amend this regulation. 

A second key development involves everyone’s favorite friend, the QM patch. The patch is that “temporary” provision, under which mortgages eligible for sale to the GSEs are classified as qualified mortgages. Also on December 10th of last year, the CFPB finalized amendments to this regulation which would replace the QM patch with a new QM definition classifying mortgages as qualified provided the interest rate terms of the loan are comparable to similar mortgages.

Currently, credit unions must be in compliance with this second regulation by July 1, 2021. In its statement yesterday, the CFPB indicated that it would also be considering making amendments to this regulation and most likely delaying the mandatory compliance deadline. 

Entry filed under: Compliance, Federal Legislation, Regulatory. Tags: , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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