Finally, the new General QM rule preserves the QM status of loans that meet FHA and VA QM definitions for loans that those agencies insure or guarantee. While there are no hard limits like the former 43% DTI limitation, the new rule refers to agency underwriting standards for potential documentation and analysis standards. The new General QM rule also replaces the relatively inflexible Appendix Q requirements with more flexible ‘consider and verify’ requirements for income, assets and debts. As a result, General QM loans under the revised rule with an APR versus APOR greater than 1.5% but less than 2.25% will only have a rebuttable presumption of compliance with the ATR requirement. Note that the cutoff for safe harbor ATR status (meaning a conclusive presumption of compliance) remains 1.5% (APR versus APOR). For an adjustable-rate loan, the maximum potential APR during the first five years of the loan would be used to compare against its APOR. To meet the new General QM rule, a loan’s annual percentage rate (APR) may not exceed its average prime offer rate (APOR) by more than 2.25% (for first-lien loans of $110,260 or more, updated annually according to the change in Consumer Price Index). The new rule replaces the maximum 43% DTI limitation with a loan pricing calculation. The revised General QM rule still requires substantially equal payments, no borrower-elected deferment of principal or balloon payment, thirty-year term or less, and 3% points and fees for a loan amount of $100,000 or greater.
#Atr qm rule Patch
The CFPB notes that a large number of loans are currently originated under the GSE Patch that would not qualify under the current General QM requirements, often because they have a debt-to-income (DTI) ratio greater than 43%, or may not meet the underwriting requirements of Appendix Q. The current GSE Patch requires the following terms, in addition to eligibility for sale to Fannie Mae or Freddie Mac: thirty-year term or less, repaid in substantially equal payments, with no negative amortization, no borrower-elected deferment of principal or balloon due at the end of the loan term, and maximum of 3% points and fees (for a loan amount of $100,000 or more). This is perhaps the more important rule of the two, because it is intended to replace the current GSE Patch without disrupting current loan origination volume or availability to consumers, while simultaneously maintaining the goal of requiring lenders to make a reasonable determination on a case-by-case basis that borrowers will be able to repay loans made. Revised General Qualified Mortgage Rule >
The existing GSE Patch will continue to be available for applications received through June 30, 2021, and after expiration of the GSE Patch, compliance with the revised General QM rule will be mandatory for applications received on or after July 1, 2021. The two rules will apply to loan applications received on or after March 1, 2021.
The industry has been awaiting this announcement, because once they take effect, the new rules will replace the current widely-used ‘temporary’ General QM category for loans that are underwritten to be eligible for sale to Fannie Mae and Freddie Mae, often called the GSE Patch. One adds an additional category to the General Qualified Mortgage (QM) rule, while the other creates a new QM category for seasoned mortgages.
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