On June 17, 2022, the Consumer Financial Protection Bureau (CFPB) announced that it would re-examine a rule determining which mortgages are exempt from some litigation during foreclosures. In a blog post, the government agency said it would review its Qualified Mortgage (QM) rule. The Federal Truth In Lending Act’s rule establishes requirements that mortgages must adhere to to be protected from inappropriate underwriting counterclaims during a foreclosure. The CFPB’s action is a part of a larger assessment of regulations that, in the agency’s opinion, need more examination because they were adopted from other agencies, issued within the agency’s first ten years of operation, or have undergone extensive market testing.

The amended rule substituted price-based standards for the old guideline’s 43% maximum debt to income ratio. According to the amended rule, a mortgage satisfies the “capacity to repay” requirement if the annual percentage rate is not much higher than the typical prime offer rate for a loan of a similar size. Furthermore, it introduced additional flexible alternatives for lenders to check the borrower’s income or assets in addition to the property’s value and debts, as well as higher pricing criteria for loans with lower sums.

The CFPB stated in its bulletin that the review is being conducted to investigate measures to encourage simplified modification and refinancing in the mortgage market. However, the CFPB stated that it would pay close attention to the “seasoning” restrictions. The “seasoning” section of the QM rule has already raised concerns from the past, as mentioned by Diane Thompson, senior advisor for markets and regulations at the CFPB. To read more about the CFPB’s attempt to modify the QM rule, click here.


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