The Consumer Financial Protection Bureau plans to delay the mandatory compliance date of the General Qualified Mortgage (QM) final rule that was issued late last year.

The CFPB yesterday released a notice of proposed rulemaking to delay the upcoming QM compliance date from July 1, 2021, to Oct. 1, 2022. The CFPB said in a statement that extending the compliance date would “ensure homeowners struggling with the financial impacts of the COVID-19 pandemic have the options they need.”

“At a time when so many consumers are struggling and at risk of losing ground, particularly Black and Hispanic consumers, we need to do all we can to help people stay in their homes and to ensure the availability of responsible, affordable mortgages,” CFPB Acting Director David Uejio said in the statement. “In proposing to extend the date by which lenders must comply with the CFPB’s new General QM definition, we are working to provide needed options for both homeowners and lenders during a time of uncertainty and hardship.”

The General QM final rule was developed as part of the CFPB’s work to protect homeowners from “debt traps and unaffordable, irresponsible mortgage loans,” the CFPB said.

Lenders must determine beforehand whether consumers have the ability to repay mortgage loans, and QM loans are considered loans that consumers have an ability to repay. The QM rule finalized in December changed ability-to-pay requirements by eliminating the rule that the consumer’s debt-to-income ratio (DTI) could not exceed 43 percent. The new rule is instead based on the loan’s pricing, which itself reflects the consumer’s ability to repay.

The CFPB said yesterday that QM loans are presumed to be made based on the lender’s reasonable determination of the homeowner’s ability to repay the loan. Extending the mandatory compliance date of the final rule would allow lenders more time to offer QM loans based on the homeowners’ DTI ratio, and not solely based on a pricing cut-off, the statement said.

Extending the compliance date of the General QM final rule would also give lenders more time to use the GSE Patch, the CFPB said, providing QM status to loans that are eligible for sale to Fannie Mae or Freddie Mac.

The GSE Patch is a temporary qualified mortgage definition for certain mortgage loans eligible for purchase or guarantee by the Fannie Mae and Freddie Mac. This temporary definition allowed loans to be eligible for QM status even if the DTI ratio exceeded 43 percent. It was set to expire in January before the CFPB extended it last year.

“The COVID-19 pandemic has left almost 3 million American homeowners behind on their mortgages.  Black and Hispanic communities, in particular, have still not recovered from the impact of the Great Recession and bear the heaviest burden of job losses under COVID-19,” the CFPB said. “Forbearance plans and foreclosure moratoriums have helped many homeowners stay in their homes, but those interventions may end before either the broader economy has recovered from the impact of the pandemic or the housing market has reached a new equilibrium. The CFPB believes that an extension of the mandatory compliance date may help ensure stability and access to affordable, responsible credit in the mortgage market.”

The CFPB said that if the extension date is finalized, the previous DTI-based General QM definition, the new price-based General QM definition, and the GSE Patch would remain available as long as the lender received the consumer’s application prior to Oct. 1, 2022. The GSE Patch, though, would terminate if the GSEs exit conservatorship before Oct. 1, 2022.

The CFPB will accept comments through April 5 on the proposal to extend the compliance date.