The new rule takes a “price-based” approach to replace the 43% debt-to-income ratio (DTI) requirement for general QM loans. This tactic, according to the agency, is “more holistic” since the price of a loan is “a more flexible measure of a consumer’s repayment capacity than DTI alone.”
CFPB Director Kathleen Kraninger said in a statement that the new price-based limit “strikes the best balance between assessing consumers’ ability to repay and promoting access to responsible mortgage credit and affordable ”.
The office has also created a new category for qualified mortgages: Seasoned QMs. The new category is for senior fixed rate loans that have met certain performance and underwriting requirements, are held in portfolio by the lender for a period of 36 months, and comply with general product restrictions. A seasoned loan can become a general MQ after three years of on-time payments from the borrower.
“This final rule of quality management will ensure access to responsible and affordable credit in the mortgage market through responsible innovation – allowing lenders the flexibility to respond to changes in the economy while ensuring that a consumer has the ability to repay will help many consumers achieve their dream of owning a home, ”Kraninger said.
NAR Chairman Charlie Oppler expressed appreciation for the CFPB’s efforts to fine-tune the rule.