The New Rule specifies alternative thresholds for loans secured by manufactured homes and for subordinate loans. For a first lien transaction where the loan amount is less than $66,156.00, the threshold is 6.5 or more percentage points.For a first lien transaction where the loan amount is $66,156.00 or more, but less than $110,260.00, the threshold is 3.5 or more percentage points.For a first lien transaction where the loan amount is greater than or equal to $110,260.00, the threshold is 2.25 percentage points.To be considered a General QM under the New Rule, the APR on the loan must not exceed the average prime offer rate (APOR) for a comparable transaction by more than the following thresholds : The New Rule eliminates the 43% DTI standard in favor of a loan price-based standard, although the creditor is still obligated to consider an applicant’s DTI as part of the new “consider and verify” rules discussed below. Under the former version of Regulation Z, in order to satisfy the Ability-to-Repay Rule for a General QM, the creditor had to verify that the consumer’s DTI ratio was under 43% according to the standards listed in Appendix Q of Regulation Z. In addition, effective July 1, 2021, the New Rule permanently eliminated the existing GSE Patch.Įlimination of the DTI Standard for Qualified Mortgages The New Rule replaces the strict 43% debt-to-income (DTI) ratio analysis with a loan price-based analysis tied to annual percentage rate (APR) limits, amends creditors’ “consider and verify” obligations, and creates a new class of QMs. The New Rule went into effect March 1, 2021, with consumer loan applications filed on or after July 1, 2021, subject to mandatory compliance. Loans that comply with Regulation Z’s requirements qualify for certain protections from liability. Regulation Z requires creditors to make a reasonable, good-faith determination of a consumer’s ability to repay their residential mortgage loan. 29, 2020, the Consumer Financial Protection Bureau (CFPB) published a final rule amending Regulation Z’s Ability-to-Repay/Qualified Mortgage (QM) requirements (the New Rule).
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