ICBA filed a comment letter urging the Consumer Financial Protection Bureau to extend its policy exempting Fannie Mae and Freddie Mac mortgage loans from the bureau’s Qualified Mortgage rule to January 2022 or one year from the finalization of any proposed rule.
The exemption–also known as the GSE Patch–has had sweeping effects on the secondary mortgage market, allowing community banks to earn QM status and legal protections on mortgage loans they sell to the GSEs.
Any uncertainty about the Patch’s expiration could adversely affect underwriting standards in the conventional mortgage market, which is further complicated by the current economic crisis resulting from COVID-19, ICBA wrote. Extending the QM Patch will also allow community banks time to adjust to changes impacting a borrower’s ability to repay.
The GSE patch allows creditors that make loans eligible for guarantee or purchase by the GSEs to achieve QM safe harbor status even if the loans exceed the 43 percent debt-to-income ratio requirement under the general QM loan definition. The GSE Patch is set to expire Jan. 10, 2021.