The agency confirmed that loans backed by Fannie Mae and Freddie Mac can continue avoiding debt-to-income limits as the bureau completes a revamp of the Qualified Mortgage standard.
The Consumer Financial Protection Bureau's overhaul of its Qualified Mortgage standard is alarming free-market advocates who say it will precipitate a return to easy credit and higher defaults and could disproportionately harm minorities.
The agency’s plan to extend the "qualified mortgage" stamp of approval to more loans could help lenders that rely on alternative data and cushion the blow of other QM changes for Fannie Mae and Freddie Mac.
The Consumer Financial Protection Bureau says the proposal would increase access to credit, but consumer groups argue that it will encourage lenders to make high-cost loans while protecting them from legal liability.
An imminent high court ruling about the independence of the bureau's director, coupled with an election victory for Joe Biden, could doom a plan to extend GSEs' exemption from tough debt-to-income requirements on mortgages.
The Consumer Financial Protection Bureau plans to change the definition of what constitutes a qualified mortgage from a 43% debt-to-income limit to a price-based threshold, and further extend a temporary exemption given to Fannie Mae and Freddie Mac.
With no way of knowing just how many borrowers will need the mods after the coronavirus forbearance period ends, lenders are deploying artificial intelligence and servicing protocols to tame the ferocious piles of paperwork awaiting them.
The agency's director said both steps will come as part of an ongoing review of agency rules and show "my commitment under the law to be effective and evidence based” in providing clarity to stakeholders.
Now that the Consumer Financial Protection Bureau says it will scrap an unpopular standard for so-called qualified mortgages, the big question is what will take its place.
