Over the last several months, a number of the nation’s largest lenders and housing trade groups have called on the Consumer Financial Protection Bureau to make changes to the Ability to Repay/Qualified Mortgage rule.
More specifically, Bank of America, Quicken Loans, Wells Fargo, Caliber Home Loans, along with the Mortgage Bankers Association, the American Bankers Association, the National Fair Housing Alliance, and others asked the CFPB to do away with the QM rule’s debt-to-income ratio requirement.
And now, it looks like they’re going to get their wish.
In a letter sent last week to several prominent members of Congress, CFPB Director Kathy Kraninger said the bureau has decided to propose an amendment to the QM Rule that would “move away” from DTI as a factor in mortgage underwriting.
Specifically, Kraninger said the CFPB has decided to shift from the DTI standard and move to an “alternative, such as a pricing threshold (i.e., the difference between the loan’s annual percentage rate and the average prime offer rate for a comparable transaction.”
According to Kraninger, the proposed alternative would be “intended to better ensure that responsible, affordable mortgage credit remains available to consumers.”
The Ability to Repay/Qualified Mortgage rule was enacted by the CFPB after the financial crisis and requires lenders to verify a borrower’s ability to repay the mortgage before lending them money.
This includes a review of a borrower’s debts and assets to ensure they have the ability to repay the loan, with a stipulation that their DTI ratio does not exceed 43%.
