ICBA offers alternative to redefining QM

ICBA expressed concerns with the Consumer Financial Protection Bureau's proposal to change its Qualified Mortgage definition to a price-based approach.

The CFPB is proposing to replace debt-to-income ratio and Appendix Q requirements with an approach that would measure a borrower's ability to repay by comparing a loan’s annual percentage rate to the average prime offer rate for a comparable transaction.

The bureau is proposing to eliminate the 43 percent DTI limit to avoid a reduction in credit access following the scheduled expiration of the GSE "patch," which exempts Fannie Mae and Freddie Mac mortgage loans from the QM rule. The patch is slated to end on Jan. 10, 2021.

In a comment letter, ICBA said the DTI ratio should remain as a measure of borrowers' ability to repay, noting that a price-based approach could be easily manipulated and would favor the largest mortgage lenders. ICBA advocated a hybrid approach that retains a range of DTI thresholds above the 43 percent, capped at 50 percent.