New CFPB rules set the stage for changes in mortgage lending
As the Consumer Financial Protection Bureau begins to move forward with two critical transitions in mortgage-lending rules, the question of ‘how will his impact the housing market, and home-buyers?’ is called under consideration.
The first of these new transitions is a proposal to remove the DTI requirement from standards for mortgage underwriting; and it appears that the CFPB Director, Kathy Kraninger, intends on moving forward with this proposed amendment to the QM Rule. The DTI requirement is an evaluation of debt-to-income, typically disqualifying anyone exceeding 43%. The removal of this rule is said to be replaced by “a price-based approach, [the CFPB] saying it preliminarily concludes that a loan’s price, as measured by comparing a loan’s annual percentage rate to the average prime offer rate for a comparable transaction, is a more holistic and flexible measure of a consumer’s ability to repay than DTI alone.”
The other reversal will be the expiration of the QM Patch, a rule exempting Government Supported Enterprises- or GSE’s- like Fannie Mae and Freddie Mac from adhering to the DTI rule, allowing them to lend to consumers with a higher than 43% DTI ratio. This rule is set to expire in January of 2021. While the rule is still expected to expire, it may be extended as an effort from CFPB to create a smooth transition.
The National Association of Realtors has commended the CFPB for the extension of the QM Patch during these uncertain times. Supporters of the removal of the DTI rule may see this as a lever for making loans more available, however, we can continue to speculate about the measures that will replace this rule.
Both the more immediate end to the QM Patch, and the potential for removal of the DTI requirement altogether signal that lenders may be able to impact the housing market in a new way. These changes leave real estate professionals, lenders, and consumers to ponder the consequences.
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Read the complete article, CFPB to eliminate DTI requirement from qualified mortgage standards, from Housing Wire.