# Qualified Mortgage Definition Under the Truth in Lending Act (Regulation Z): General QM Loan Definition

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2020-13739

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** July 10, 2020
- **Citation:** 85 FR 41716

## Text

BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1026
[Docket No. CFPB-2020-0020]
RIN 3170-AA98
Qualified Mortgage Definition Under the Truth in Lending Act (Regulation Z): General QM Loan Definition

AGENCY:

Bureau of Consumer Financial Protection.

ACTION:

Proposed rule with request for public comment.

SUMMARY:

With certain exceptions, Regulation Z requires creditors to make a reasonable, good faith determination of a consumer's ability to repay any residential mortgage loan, and loans that meet Regulation Z's requirements for “qualified mortgages” (QMs) obtain certain protections from liability. One category of QMs is the General QM loan category. For General QM loans, the ratio of the consumer's total monthly debt to total monthly income (DTI ratio) must not exceed 43 percent. In this notice of proposed rulemaking, the Bureau proposes certain amendments to the General QM loan definition in Regulation Z. Among other things, the Bureau proposes to remove the General QM loan definition's 43 percent DTI limit and replace it with a price-based threshold. Another category of QMs is loans that are eligible for purchase or guarantee by either the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) (government-sponsored enterprises, or GSEs), while operating under the conservatorship or receivership of the Federal Housing Finance Agency (FHFA). The GSEs are currently under Federal conservatorship. The Bureau established this category of QMs (Temporary GSE QM loans) as a temporary measure that is set to expire no later than January 10, 2021 or when the GSEs exit conservatorship. In a separate proposal released simultaneously with this proposal, the Bureau proposes to extend the Temporary GSE QM loan definition to expire upon the effective date of final amendments to the General QM loan definition in Regulation Z (or when the GSEs cease to operate under the conservatorship of the FHFA, if that happens earlier). In this present proposed rule, the Bureau proposes the amendments to the General QM loan definition that are referenced in that separate proposal. The Bureau's objective with these proposals is to facilitate a smooth and orderly transition away from the Temporary GSE QM loan definition and to ensure access to responsible, affordable mortgage credit upon its expiration.

DATES:

Comments must be received on or before September 8, 2020.

ADDRESSES:

You may submit comments, identified by Docket No. CFPB-2020-0020 or RIN 3170-AA98, by any of the following methods:

•
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.

•
Email: 2020-NPRM-ATRQM-GeneralQM@cfpb.gov.
Include Docket No. CFPB-2020-0020 or RIN 3170-AA98 in the subject line of the message.

•
Mail/Hand Delivery/Courier:
Comment Intake—General QM Amendments, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552. Please note that due to circumstances associated with the COVID-19 pandemic, the Bureau discourages the submission of comments by mail, hand delivery, or courier.

Instructions:
The Bureau encourages the early submission of comments. All submissions should include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. Because paper mail in the Washington, DC area and at the Bureau is subject to delay, and in light of difficulties associated with mail and hand deliveries during the COVID-19 pandemic, commenters are encouraged to submit comments electronically. In general, all comments received will be posted without change to
https://www.regulations.gov.
In addition, once the Bureau's headquarters reopens, comments will be available for public inspection and copying at 1700 G Street NW, Washington, DC 20552, on official business days between the hours of 10 a.m. and 5 p.m. Eastern Time. At that time, you can make an appointment to inspect the documents by telephoning 202-435-9169.

All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Proprietary information or sensitive personal information, such as account numbers or Social Security numbers, or names of other individuals, should not be included. Comments will not be edited to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT:

Benjamin Cady or Waeiz Syed, Counsels, or Sarita Frattaroli, David Friend, Joan Kayagil, Mark Morelli, Amanda Quester, Alexa Reimelt, Marta Tanenhaus, Priscilla Walton-Fein, or Steven Wrone, Senior Counsels, Office of Regulations, at 202-435-7700. If you require this document in an alternative electronic format, please contact
CFPB_Accessibility@cfpb.gov.

SUPPLEMENTARY INFORMATION:

I. Summary of the Proposed Rule

The Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule or Rule) requires a creditor to make a reasonable, good faith determination of a consumer's ability to repay a residential mortgage loan according to its terms. Loans that meet the Rule's requirements for qualified mortgages (QMs) obtain certain protections from liability. The Rule defines several categories of QMs.

One QM category defined in the Rule is the General QM loan category. General QM loans must comply with the Rule's prohibitions on certain loan features, its points-and-fees limits, and its underwriting requirements. For General QM loans, the ratio of the consumer's total monthly debt to total monthly income (DTI) ratio must not exceed 43 percent. The Rule requires that creditors must calculate, consider, and verify debt and income for purposes of determining the consumer's DTI ratio using the standards contained in appendix Q of Regulation Z.

A second, temporary category of QM loans defined in the Rule consists of mortgages that (1) comply with the same loan-feature prohibitions and points-and-fees limits as General QM loans and (2) are eligible to be purchased or guaranteed by the GSEs while under the conservatorship of the FHFA. This proposal refers to these loans as Temporary GSE QM loans, and the provision that created this loan category is commonly known as the GSE Patch. Unlike for General QM loans, the Rule does not prescribe a DTI limit for Temporary GSE QM loans. Thus, a loan can qualify as a Temporary GSE QM loan even if the consumer's DTI ratio exceeds 43 percent, so long as the loan is eligible to be purchased or guaranteed by either of the GSEs. In addition, for Temporary GSE QM loans, the Rule does not require creditors to use appendix Q to determine the consumer's income, debt, or DTI ratio.

Under the Rule, the Temporary GSE QM loan definition expires with respect to each GSE when that GSE exits conservatorship or on January 10, 2021, whichever comes first. The GSEs are currently in conservatorship. Despite the Bureau's expectations when the Rule was published in 2013, Temporary GSE QM loan originations continue to represent a large and persistent share of the residential mortgage loan market. A significant number of Temporary GSE

QM loans would not qualify as General QM loans under the current regulations after the Temporary GSE QM loan definition expires. These loans would not qualify as General QM loans either because the consumer's DTI ratio is above 43 percent or because the creditor's method of documenting and verifying income or debt does not comply with appendix Q. Although alternative loan options, including some other types of QM loans, would still be available to many consumers who could not qualify for General QM loans, the Bureau's analysis of available data indicates that many loans that are currently Temporary GSE QM loans would cost materially more for consumers and many would not be made at all.

In a separate proposal (Extension Proposal) released simultaneously with this proposal, the Bureau proposes to extend the Temporary GSE QM loan definition to expire upon the effective date of final amendments to the General QM loan definition or when the GSEs exit conservatorship, whichever comes first. In this proposal, the Bureau proposes the amendments to the General QM loan definition that are referenced in the Extension Proposal.

The Bureau is issuing this proposal to amend the General QM loan definition because it is concerned that retaining the existing General QM loan definition with the 43 percent DTI limit after the Temporary GSE QM loan definition expires would significantly reduce the size of QM and could significantly reduce access to responsible, affordable credit. The Bureau is proposing a price-based General QM loan definition to replace the DTI-based approach because it preliminarily concludes that a loan's price, as measured by comparing a loan's annual percentage rate (APR) to the average prime offer rate (APOR) for a comparable transaction, is a strong indicator of a consumer's ability to repay and is a more holistic and flexible measure of a consumer's ability to repay than DTI alone.

Under the proposal, a loan would meet the General QM loan definition in § 1026.43(e)(2) only if the APR exceeds APOR for a comparable transaction by less than two percentage points as of the date the interest rate is set. The proposal would provide higher thresholds for loans with smaller loan amounts and for subordinate-lien transactions. The proposal would retain the existing product-feature and underwriting requirements and limits on points and fees. Although the proposal would remove the 43 percent DTI limit from the General QM loan definition, the proposal would require that the creditor consider the consumer's income or assets, debt obligations, and DTI ratio or residual income and verify the consumer's current or reasonably expected income or assets other than the value of the dwelling (including any real property attached to the dwelling) that secures the loan and the consumer's current debt obligations, alimony, and child support. The proposal would remove appendix Q. To prevent uncertainty that may result from appendix Q's removal, the proposal would clarify the requirements to consider and verify a consumer's income, assets, debt obligations, alimony, and child support. The proposal would preserve the current threshold separating safe harbor from rebuttable presumption QMs, under which a loan is a safe harbor QM if its APR exceeds APOR for a comparable transaction by less than 1.5 percentage points as of the date the interest rate is set (or by less than 3.5 percentage points for subordinate-lien transactions).

The Bureau is proposing a price-based approach to replace the specific DTI limit because it is concerned that imposing a DTI limit as a condition for QM status under the General QM loan definition may be overly burdensome and complex in practice and may unduly restrict access to credit because it provides an incomplete picture of the consumer's financial capacity. In particular, the Bureau is concerned that conditioning QM status on a specific DTI limit may impair access to responsible, affordable credit for some consumers for whom it might be appropriate to presume ability to repay for their loans at consummation. For the reasons set forth below, the Bureau preliminarily concludes that a price-based General QM loan definition is appropriate because a loan's price, as measured by comparing a loan's APR to APOR for a comparable transaction, is a strong indicator of a consumer's ability to repay and is a more holistic and flexible measure of a consumer's ability to repay than DTI alone.

In addition, although the Bureau is proposing to remove the 43 percent DTI limit and adopt a price-based approach for the General QM loan definition, the Bureau requests comment on certain alternative approaches that would retain a DTI limit but would raise it above the current limit of 43 percent and provide a more flexible set of standards for verifying debt and income in place of appendix Q.

The Bureau proposes that the effective date of a final rule relating to this proposal would be six months after publication in the
Federal Register
. The revised regulations would apply to covered transactions for which creditors receive an application on or after this effective date. The Bureau tentatively determines that a six-month period between
Federal Register
publication of a final rule and the final rule's effective date would give creditors enough time to bring their systems into compliance with the revised regulations. The Bureau does not intend to issue a final rule amending the General QM loan definition early enough for it to take effect before April 1, 2021. The Bureau requests comment on this proposed effective date. The Bureau specifically seeks comment on whether there is a day of the week or time of month that would most facilitate implementation of the proposed changes.

II. Background

A. Dodd-Frank Act Amendments to the Truth in Lending Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amended the Truth in Lending Act (TILA) to establish, among other things, ability-to-repay (ATR) requirements in connection with the origination of most residential mortgage loans.
1

The amendments were intended “to assure that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive or abusive.”
2

As amended, TILA prohibits a creditor from making a residential mortgage loan unless the creditor makes a reasonable and good faith determination based on verified and documented information that the consumer has a reasonable ability to repay the loan.
3

1
Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, sections 1411-12, 1414, 124 Stat. 1376 (2010); 15 U.S.C. 1639c.

2
15 U.S.C. 1639b(a)(2).

3
15 U.S.C. 1639c(a)(1). TILA section 103 defines “residential mortgage loan'' to mean, with some exceptions including open-end credit plans, “any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real property that includes a dwelling.” 15 U.S.C. 1602(dd)(5). TILA section 129C also exempts certain residential mortgage loans from the ATR requirements.
See, e.g.,
15 U.S.C. 1639c(a)(8) (exempting reverse mortgages and temporary or bridge loans with a term of 12 months or less).

TILA identifies the factors a creditor must consider in making a reasonable and good faith assessment of a consumer's ability to repay. These factors are the consumer's credit history, current and expected income, current obligations, DTI ratio or residual income after paying non-mortgage debt and mortgage-related obligations, employment status, and other financial

resources other than equity in the dwelling or real property that secures repayment of the loan.
4

A creditor, however, may not be certain whether its ATR determination is reasonable in a particular case, and it risks liability if a court or an agency, including the Bureau, later concludes that the ATR determination was not reasonable.

4
15 U.S.C. 1639c(a)(3).

TILA addresses this uncertainty by defining a category of loans—called QMs—for which a creditor “may presume that the loan has met” the ATR requirements.
5

The statute generally defines a QM to mean any residential mortgage loan for which:

5
15 U.S.C. 1639c(b)(1).

• There is no negative amortization, interest-only payments, or balloon payments;

• The loan term does not exceed 30 years;

• The total points and fees generally do not exceed 3 percent of the loan amount;

• The income and assets relied upon for repayment are verified and documented;

• The underwriting uses a monthly payment based on the maximum rate during the first five years, uses a payment schedule that fully amortizes the loan over the loan term, and takes into account all mortgage-related obligations; and

• The loan complies with any guidelines or regulations established by the Bureau relating to the ratio of total monthly debt to monthly income or alternative measures of ability to pay regular expenses after payment of total monthly debt.
6

6
15 U.S.C. 1639c(b)(2)(A).

B. The Ability-to-Repay/Qualified Mortgage Rule

In January 2013, the Bureau issued a final rule amending Regulation Z to implement TILA's ATR requirements (January 2013 Final Rule).
7

The January 2013 Final Rule became effective on January 10, 2014, and the Bureau amended it several times through 2016.
8

This proposal refers to the January 2013 Final Rule and later amendments to it collectively as the Ability-to-Repay/Qualified Mortgage Rule, the ATR/QM Rule, or the Rule. The ATR/QM Rule implements the statutory ATR provisions discussed above and defines several categories of QM loans.
9

7
78 FR 6408 (Jan. 30, 2013).

8

See
78 FR 35429 (June 12, 2013); 78 FR 44686 (July 24, 2013); 78 FR 60382 (Oct. 1, 2013); 79 FR 65300 (Nov. 3, 2014); 80 FR 59944 (Oct. 2, 2015); 81 FR 16074 (Mar. 25, 2016).

9
12 CFR 1026.43(c), (e).

1. General QM Loans

One category of QM loans defined by the Rule consists of “General QM loans.”
10

A loan is a General QM loan if:

10
The QM definition is related to the definition of Qualified Residential Mortgage (QRM). Section 15G of the Securities Exchange Act of 1934, added by section 941(b) of the Dodd-Frank Act, generally requires the securitizer of asset-backed securities (ABS) to retain not less than five percent of the credit risk of the assets collateralizing the ABS. 15 U.S.C. 78o-11. Six Federal agencies (not including the Bureau) are tasked with implementing this requirement. Those agencies are the Board of Governors of the Federal Reserve System (Board), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the Securities and Exchange Commission, the FHFA, and the U.S. Department of Housing and Urban Development (HUD) (collectively, the QRM agencies). Section 15G of the Securities Exchange Act of 1934 provides that the credit risk retention requirements shall not apply to an issuance of ABS if all of the assets that collateralize the ABS are QRMs.
See
15 U.S.C. 78o-11(c)(1)(C)(iii), (4)(A) and (B). Section 15G requires the QRM agencies to jointly define what constitutes a QRM, taking into consideration underwriting and product features that historical loan performance data indicate result in a lower risk of default.
See
15 U.S.C. 78o-11(e)(4). Section 15G also provides that the definition of a QRM shall be “no broader than” the definition of a “qualified mortgage,” as the term is defined under TILA section 129C(b)(2), as amended by the Dodd-Frank Act, and regulations adopted thereunder. 15 U.S.C. 78o-11(e)(4)(C). In 2014, the QRM agencies issued a final rule adopting the risk retention requirements. 79 FR 77601 (Dec. 24, 2014). The final rule aligns the QRM definition with the QM definition defined by the Bureau in the ATR/QM Rule, effectively exempting securities comprised of loans that meet the QM definition from the risk retention requirement. The final rule also requires the agencies to review the definition of QRM no later than four years after the effective date of the final risk retention rules. In 2019, the QRM agencies initiated a review of certain provisions of the risk retention rule, including the QRM definition. 84 FR 70073 (Dec. 20, 2019). Among other things, the review allows the QRM agencies to consider the QRM definition in light of any changes to the QM definition adopted by the Bureau.

• The loan does not have negative-amortization, interest-only, or balloon-payment features, a term that exceeds 30 years, or points and fees that exceed specified limits;
11

11
12 CFR 1026.43(e)(2)(i)-(iii).

• The creditor underwrites the loan based on a fully amortizing schedule using the maximum rate permitted during the first five years;
12

12
12 CFR 1026.43(e)(2)(iv).

• The creditor considers and verifies the consumer's income and debt obligations in accordance with appendix Q;
13

and

13
12 CFR 1026.43(e)(2)(v).

• The consumer's DTI ratio is no more than 43 percent, determined in accordance with appendix Q.
14

14
12 CFR 1026.43(e)(2)(vi).

Appendix Q contains standards for calculating and verifying debt and income for purposes of determining whether a mortgage satisfies the 43 percent DTI limit for General QM loans. The standards in appendix Q were adapted from guidelines maintained by the Federal Housing Administration (FHA) of HUD when the January 2013 Final Rule was issued.
15

Appendix Q addresses how to determine a consumer's employment-related income (
e.g.,
income from wages, commissions, and retirement plans); non-employment related income (
e.g.,
income from alimony and child support payments, investments, and property rentals); and liabilities, including recurring and contingent liabilities and projected obligations.
16

15
78 FR 6408, 6527-28 (Jan. 30, 2013) (noting that appendix Q incorporates, with certain modifications, the definitions and standards in HUD Handbook 4155.1, Mortgage Credit Analysis for Mortgage Insurance on One-to-Four-Unit Mortgage Loans).

16
12 CFR 1026, appendix Q.

2. Temporary GSE QM Loans

A second, temporary category of QM loans defined by the Rule, Temporary GSE QM loans, consists of mortgages that (1) comply with the Rule's prohibitions on certain loan features, its underwriting requirements, and its limitations on points and fees;
17

and (2) are eligible to be purchased or guaranteed by either GSE while under the conservatorship of the FHFA.
18

Unlike for General QM loans, Regulation Z does not prescribe a DTI limit for Temporary GSE QM loans. Thus, a loan can qualify as a Temporary GSE QM loan even if the DTI ratio exceeds 43 percent, as long as the DTI ratio meets the applicable GSE's DTI requirements and other underwriting criteria. In addition, income and debt for such loans, and DTI ratios, generally are verified and calculated using GSE standards, rather than appendix Q. The Temporary GSE QM loan category—also known as the GSE Patch—is scheduled to expire with respect to each GSE when that GSE exits conservatorship or on January 10, 2021, whichever comes first.
19

17
12 CFR 1026.43(e)(2)(i) through (iii).

18
12 CFR 1026.43(e)(4).

19
12 CFR 1026.43(e)(4)(iii)(B). The ATR/QM Rule created several additional categories of QM loans. The first additional category consisted of mortgages eligible to be insured or guaranteed (as applicable) by HUD (FHA loans), the U.S. Department of Veterans Affairs (VA loans), the U.S. Department of Agriculture (USDA loans), and the Rural Housing Service (RHS loans). 12 CFR 1026.43(e)(4)(ii)(B)-(E). This temporary category of QM loans no longer exists because the relevant Federal agencies have since issued their own QM rules.
See, e.g.,
24 CFR 203.19 (HUD rule). Other categories of QM loans provide more flexible standards for certain loans originated by certain small creditors. 12 CFR 1026.43(e)(5), (f);
cf.
12 CFR 1026.43(e)(6) (applicable only to covered transactions for which the application was received before April 1, 2016).

In the January 2013 Final Rule, the Bureau explained why it created the Temporary GSE QM loan category. The Bureau observed that it did not believe that a 43 percent DTI ratio “represents the outer boundary of responsible lending” and acknowledged that historically, and even after the financial crisis, over 20 percent of mortgages exceeded that threshold.
20

The Bureau believed, however, that, as DTI ratios increase, “the general ability-to-repay procedures, rather than the qualified mortgage framework, is better suited for consideration of all relevant factors that go to a consumer's ability to repay a mortgage loan” and that “[o]ver the long term . . . there will be a robust and sizable market for prudent loans beyond the 43 percent threshold even without the benefit of the presumption of compliance that applies to qualified mortgages.”
21

20
78 FR 6408, 6527 (Jan. 30, 2013).

21

Id.
at 6527-28.

At the same time, the Bureau noted that the mortgage market was especially fragile following the financial crisis, and GSE-eligible loans and federally insured or guaranteed loans made up a significant majority of the market.
22

The Bureau believed that it was appropriate to consider for a period of time that GSE-eligible loans were originated with an appropriate assessment of the consumer's ability to repay and therefore warranted being treated as QMs.
23

The Bureau believed in 2013 that this temporary category of QM loans would, in the near term, help to ensure access to responsible, affordable credit for consumers with DTI ratios above 43 percent, as well as facilitate compliance by creditors by promoting the use of widely recognized, federally related underwriting standards.
24

22

Id.
at 6533-34.

23

Id.
at 6534.

24

Id.
at 6533.

In making the Temporary GSE QM loan definition temporary, the Bureau sought to “provide an adequate period for economic, market, and regulatory conditions to stabilize” and “a reasonable transition period to the general qualified mortgage definition.”
25

The Bureau believed that the Temporary GSE QM loan definition would benefit consumers by preserving access to credit while the mortgage industry adjusted to the ATR/QM Rule.
26

The Bureau also explained that it structured the Temporary GSE QM loan definition to cover loans eligible to be purchased or guaranteed by either of the GSEs—regardless of whether the loans are actually purchased or guaranteed—to leave room for non-GSE private investors to return to the market and secure the same legal protections as the GSEs.
27

The Bureau believed that, as the market recovered, the GSEs and the Federal agencies would be able to reduce their market presence, the percentage of Temporary GSE QM loans would decrease, and the market would shift toward General QM loans and non-QM loans above a 43 percent DTI ratio.
28

The Bureau's view was that a shift towards non-QM loans could be supported by the non-GSE private market—
i.e.,
by institutions holding such loans in portfolio, selling them in whole, or securitizing them in a rejuvenated private-label securities (PLS) market. The Bureau noted that, pursuant to its statutory obligations under the Dodd-Frank Act, it would assess the impact of the ATR/QM Rule five years after the Rule's effective date, and the assessment would provide an opportunity to analyze the Temporary GSE QM loan definition.
29

25

Id.
at 6534.

26

Id.
at 6536.

27

Id.
at 6534.

28

Id.

29

Id.

3. Presumption of Compliance for QM Loans

In the January 2013 Final Rule, the Bureau considered whether QM loans should receive a conclusive presumption (
i.e.,
a safe harbor) or a rebuttable presumption of compliance with the ATR requirements. The Bureau concluded that the statute is ambiguous as to whether a creditor originating a QM loan receives a safe harbor or a rebuttable presumption that it has complied with the ATR requirements.
30

The Bureau noted that its analysis of the statutory construction and policy implications demonstrated that there are sound reasons for adopting either interpretation.
31

The Bureau concluded that the statutory language does not mandate either interpretation and that the presumptions should be tailored to promote the policy goals of the statute.
32

The Bureau ultimately interpreted the statute to provide for a rebuttable presumption of compliance with the ATR requirements but used its adjustment authority to establish a conclusive presumption of compliance for loans that are not “higher priced.”
33

30

Id.
at 6511.

31

Id.
at 6507.

32

Id.
at 6511.

33

Id.
at 6514.

Under the Rule, a creditor that makes a QM loan is protected from liability presumptively or conclusively, depending on whether the loan is “higher priced.” The Rule generally defines a “higher-priced” loan to mean a first-lien mortgage with an APR that exceeded APOR for a comparable transaction as of the date the interest rate was set by 1.5 or more percentage points; or a subordinate-lien mortgage with an APR that exceeded APOR for a comparable transaction as of the date the interest rate was set by 3.5 or more percentage points.
34

A creditor that makes a QM loan that is not “higher priced” is entitled to a conclusive presumption that it has complied with the Rule—
i.e.,
the creditor receives a safe harbor from liability.
35

A creditor that makes a loan that meets the standards for a QM loan but is “higher priced” is entitled to a rebuttable presumption that it has complied with the Rule.
36

34
12 CFR 1026.43(b)(4).

35
12 CFR 1026.43(e)(1)(i).

36
12 CFR 1026.43(e)(1)(ii).

The Bureau explained in the January 2013 Final Rule why it was adopting different presumptions of compliance based on the pricing of QMs.
37

The Bureau noted that the line it was drawing is one that has long been recognized as a rule of thumb to separate prime loans from subprime loans.
38

The Bureau noted that loan pricing is calibrated to the risk of the loan and that the historical performance of prime and subprime loans indicates greater risk for subprime loans.
39

The Bureau also noted that consumers taking out subprime loans tend to be less sophisticated and have fewer options and that the most abuses prior to the financial crisis occurred in the subprime market.
40

The Bureau concluded that these factors warrant imposing heightened standards for higher-priced loans.
41

For prime loans, however, the Bureau found that lower rates are indicative of ability to repay and noted that prime loans have performed significantly better than subprime loans.
42

The Bureau concluded that if a loan met the product and underwriting requirements for QM and was not a higher-priced loan, there are sufficient grounds for concluding that the creditor satisfied the ATR requirements.
43

The Bureau noted that the conclusive presumption may reduce uncertainty and litigation risk and may promote enhanced competition in the prime

market.
44

The Bureau also noted that the litigation risk for rebuttable presumption QMs likely would be quite modest and would have a limited impact on access to credit.
45

37
78 FR 6408 at 6506, 6510-14.

38

Id.
at 6408.

39

Id.
at 6511.

40

Id.

41

Id.

42

Id.

43

Id.

44

Id.

45

Id.
at 6511-12.

The Bureau also noted in the January 2013 Final Rule that policymakers have long relied on pricing to determine which loans should be subject to additional regulatory requirements.
46

That history of reliance on pricing continues to provide support for a price-based approach to the General QM loan definition. For example, in 1994 Congress amended TILA by enacting the Home Ownership and Equity Protection Act (HOEPA) as part of the Riegle Community Development and Regulatory Improvement Act of 1994.
47

HOEPA was enacted as an amendment to TILA to address abusive practices in refinancing and home-equity mortgage loans with high interest rates or high fees.
48

The statute applied generally to closed-end mortgage credit but excluded purchase money mortgage loans and reverse mortgages. Coverage was triggered if a loan's APR exceeded comparable Treasury securities by specified thresholds for particular loan types, or if points and fees exceeded eight percent of the total loan amount or a dollar threshold.
49

For high-cost loans meeting either of those thresholds, HOEPA required creditors to provide special pre-closing disclosures, restricted prepayment penalties and certain other loan terms, and regulated various creditor practices, such as extending credit without regard to a consumer's ability to repay the loan. HOEPA also created special substantive protections for high-cost mortgages, such as prohibiting a creditor from engaging in a pattern or practice of extending a high-cost mortgage to a consumer based on the consumer's collateral without regard to the consumer's repayment ability, including the consumer's current and expected income, current obligations, and employment.
50

The Board implemented the HOEPA amendments at §§ 226.31, 226.32, and 226.33
51

of Regulation Z.
52

46

Id.
at 6413-14, 6510-11.

47
Riegle Community Development and Regulatory Improvement Act, Public Law 103-325, 108 Stat. 2160 (1994).

48
As originally enacted, HOEPA defined a class of “high-cost mortgages,” which were generally closed-end home-equity loans (excluding home-purchase loans) with APRs or total points and fees exceeding prescribed thresholds. Mortgages covered by HOEPA have been referred to as “HOEPA loans,” “Section 32 loans,” or “high-cost mortgages.”

49
The Dodd-Frank Act adjusted the baseline for the APR comparison, lowered the points-and-fees threshold, and added a prepayment trigger.

50
TILA section 129(h); 15 U.S.C. 1639(h). In addition to the disclosures and limitations specified in the statute, HOEPA expanded the Board's rulemaking authority, among other things, to prohibit acts or practices the Board found to be unfair and deceptive in connection with mortgage loans.

51
Subsequently renumbered as sections 1026.31, 1026.32, and 1026.33 of Regulation Z.

52

See
60 FR 15463 (Mar. 24, 1995).

In 2001, the Board issued rules expanding HOEPA's protections to more loans by revising the APR threshold for first-lien mortgage loans and revising the ATR provisions to provide for a presumption of a violation of the rule if the creditor engages in a pattern or practice of making high-cost mortgages without verifying and documenting the consumer's repayment ability.

In 2008, the Board exercised its authority under HOEPA to extend certain consumer protections concerning a consumer's ability to repay and prepayment penalties to a new category of “higher-priced mortgage loans” (HPMLs)
53

with APRs that are lower than those prescribed for high-cost loans but that nevertheless exceed the APOR by prescribed amounts. This new category of loans was designed to include subprime credit, including subprime purchase money mortgage loans. Specifically, the Board exercised its authority to revise HOEPA's restrictions on high-cost loans based on a conclusion that the revisions were necessary to prevent unfair and deceptive acts or practices in connection with mortgage loans.
54

The Board concluded that a prohibition on making individual loans without regard for repayment ability was necessary to ensure a remedy for consumers who are given unaffordable loans and to deter irresponsible lending, which injures individual consumers. The 2008 HOEPA Final Rule provided a presumption of compliance with the higher-priced mortgage ability-to-repay requirements if the creditor follows certain procedures regarding underwriting the loan payment, assessing the DTI ratio or residual income, and limiting the features of the loan, in addition to following certain procedures mandated for all creditors.
55

However, the 2008 HOEPA Final Rule made clear that even if the creditor follows the required and optional criteria, the creditor obtained a presumption (not a safe harbor) of compliance with the repayment ability requirement. The consumer therefore could still rebut or overcome that presumption by showing that, despite following the required and optional procedures, the creditor nonetheless disregarded the consumer's ability the loan.

53
Under the Board's 2008 HOEPA Final Rule, a higher-priced mortgage loan is a consumer credit transaction secured by the consumer's principal dwelling with an APR that exceeds APOR for a comparable transaction, as of the date the interest rate is set, by 1.5 or more percentage points for loans secured by a first lien on the dwelling, or by 3.5 or more percentage points for loans secured by a subordinate lien on the dwelling. 73 FR 44522 (July 30, 2008) (2008 HOEPA Final Rule). The definition of a “higher-priced mortgage loan” includes practically all “high-cost mortgages” because the latter transactions are determined by higher loan pricing threshold tests.
See
12 CFR 226.35(a)(1).

54
73 FR 44522 (July 30, 2008).

55

See
12 CFR 1026.34(a)(4)(iii), (iv).

C. The Bureau's Assessment of the Ability-to-Repay/Qualified Mortgage Rule

Section 1022(d) of the Dodd-Frank Act requires the Bureau to assess each of its significant rules and orders and to publish a report of each assessment within five years of the effective date of the rule or order.
56

In June 2017, the Bureau published a request for information in connection with its assessment of the ATR/QM Rule (Assessment RFI).
57

These comments are summarized in general terms in part III below.

56
12 U.S.C. 5512(d).

57
82 FR 25246 (June 1, 2017).

In January 2019, the Bureau published its ATR/QM Rule Assessment Report.
58

The Report included findings about the effects of the ATR/QM Rule on the mortgage market generally, as well as specific findings about Temporary GSE QM loan originations.

58

See generally
Bureau of Consumer Fin. Prot.,
Ability to Repay and Qualified Mortgage Assessment Report
(Jan. 2019) (Assessment Report),
https://files.consumerfinance.gov/f/documents/cfpb_ability-to-repay-qualified-mortgage_assessment-report.pdf.

The Report found that loans with higher DTI levels have been associated with higher levels of “early delinquency” (
i.e.,
delinquency within two years of origination), which can serve as a proxy for measuring consumer repayment ability at consummation across a wide pool of loans.
59

The Report also found that the Rule did not eliminate access to credit for high-DTI consumers—
i.e.,
consumers with DTI ratios above 43 percent—who qualify for loans eligible for purchase or guarantee by either of the GSEs, that is, Temporary GSE QM loans.
60

On the other hand, based on application-level data obtained from nine large lenders, the Report found that the Rule eliminated between 63 and 70 percent of high-DTI home purchase

loans that were not Temporary GSE QM loans.
61

59

See, e.g., id.
at 83-84, 100-05.

60

See, e.g., id.
at 10, 194-96.

61

See, e.g., id.
at 10-11, 117, 131-47.

One main finding about Temporary GSE QM loans was that such loans continued to represent a “large and persistent” share of originations in the conforming segment of the mortgage market.
62

As discussed, the GSEs' share of the conventional, conforming purchase-mortgage market was large before the ATR/QM Rule, and the Assessment found a small increase in that share since the Rule's effective date, reaching 71 percent in 2017.
63

The Assessment Report noted that, at least for loans intended for sale in the secondary market, creditors generally offer a Temporary GSE QM loan even when a General QM loan could be originated.
64

62

Id.
at 188. Because the Temporary GSE QM loan definition generally affects only loans that conform to the GSEs' guidelines, the Assessment Report's discussion of the Temporary GSE QM loan definition focused on the conforming segment of the market, not on non-conforming (
e.g.,
jumbo) loans.

63

Id.
at 191.

64

Id.
at 192.

The continued prevalence of Temporary GSE QM loan originations is contrary to the Bureau's expectation at the time it issued the ATR/QM Rule in 2013.
65

The Assessment Report discussed several possible reasons for the continued prevalence of Temporary GSE QM loan originations. The Report first highlighted commenters' concerns with the perceived lack of clarity in appendix Q and found that such concerns “may have contributed to investors'—and at least derivatively, creditors'—preference” for Temporary GSE QM loans instead of originating loans under the General QM loan definition.
66

In addition, the Bureau has not revised appendix Q since 2013, while other standards for calculating and verifying debt and income have been updated more frequently.
67

ANPR commenters also expressed concern with appendix Q and stated that the Temporary GSE QM loan definition has benefited creditors and consumers by enabling creditors to originate QMs without having to use appendix Q.

65

Id.
at 13, 190, 238.

66

Id.
at 193.

67

Id.
at 193-94.

The Assessment Report noted that a second possible reason for the continued prevalence of Temporary GSE QM loans is that the GSEs were able to accommodate the demand for mortgages above the General QM loan definition's DTI limit of 43 percent as the DTI ratio distribution in the market shifted upward.
68

According to the Assessment Report, in the years since the ATR/QM Rule took effect, house prices have increased and consumers hold more mortgage and other debt (including student loan debt), all of which have caused the DTI ratio distribution to shift upward.
69

The Assessment Report noted that the share of GSE home purchase loans with DTI ratios above 43 percent has increased since the ATR/QM Rule took effect in 2014.
70

The available data suggest that such high-DTI lending has declined in the non-GSE market relative to the GSE market.
71

The non-GSE market has constricted even with respect to highly qualified consumers; those with higher incomes and higher credit scores are representing a greater share of denials.
72

68

Id.
at 194.

69

Id.

70

Id.
at 194-95.

71

Id.
at 119-20.

72

Id.
at 153.

The Assessment Report found that a third possible reason for the persistence of Temporary GSE QM loans is the structure of the secondary market.
73

If creditors adhere to the GSEs' guidelines, they gain access to a robust, highly liquid secondary market.
74

In contrast, while private market securitizations have grown somewhat in recent years, their volume is still a fraction of their pre-crisis levels.
75

There were less than $20 billion in new origination PLS issuances in 2017, compared with $1 trillion in 2005,
76

and only 21 percent of new origination PLS issuances in 2017 were non-QM issuances.
77

To the extent that private securitizations have occurred since the ATR/QM Rule took effect in 2014, the majority of new origination PLS issuances have consisted of prime jumbo loans made to consumers with strong credit characteristics, and these securities have a low share of non-QM loans.
78

The Assessment Report notes that the Temporary GSE QM loan definition may itself be inhibiting the growth of the non-QM market.
79

However, the Report also notes that it is possible that this market might not exist even with a narrower Temporary GSE QM loan definition, if consumers were unwilling to pay the premium charged to cover the potential litigation risk associated with non-QMs, which do not have a presumption of compliance with the ATR requirements, or if creditors were unwilling or lack the funding to make the loans.
80

73

Id.
at 196.

74

Id.

75

Id.

76

Id.

77

Id.
at 197.

78

Id.
at 196.

79

Id.
at 205.

80

Id.

The Bureau expects that each of these features of the mortgage market that concentrate lending within the Temporary GSE QM loan definition will largely persist through the current January 10, 2021 sunset date.

D. Effects of the COVID-19 Pandemic on Mortgage Markets

The COVID-19 pandemic has had a significant effect on the U.S. economy. Economic activity has contracted, some businesses have partially or completely closed, and millions of workers have become unemployed. The pandemic has also affected mortgage markets and has resulted in a contraction of mortgage credit availability for many consumers, including those that would be dependent on the non-QM market for financing. The pandemic's impact on both the secondary market for new originations and on the servicing of existing mortgages has contributed to this contraction, as described below.

1. Secondary Market Impacts and Implications for Mortgage Origination Markets

The economic disruptions associated with the COVID-19 pandemic have restricted the flow of credit in the U.S. economy, including the mortgage market. During periods of economic distress, many investors seek to purchase safer instruments and as tensions and uncertainty rose in mid-March of 2020, investors moved rapidly towards cash and government securities.
81

Indeed, the yield on the 10-year Treasury note, which moves in the opposite direction as the note's price, declined while mortgage rates increased between February 2020 and March 2020.
82

This widening spread was exacerbated by a large supply of mortgage-backed securities (MBS) entering the market, as investors in MBS sold large portfolios of agency MBS.
83

As a result, in March of 2020, the lack of investor demand to purchase mortgages made it difficult for creditors to originate loans, as many creditors rely on the ability to profitably sell loans in

the secondary market to generate the liquidity to originate new loans. This resulted in mortgages becoming more expensive for both homebuyers and homeowners looking to refinance.

81

The Quarterly CARES Act Report to Congress: Hearing Before the S. Comm. on Banking, Housing, and Urban Affairs,
116th Cong. 2-3 (2020) (statement of Jerome H. Powell, Chairman, Board of Governors of the Federal Reserve System).

82
Laurie Goodman
et al.,
Urban Institute,
Housing Finance at a Glance, Monthly Chartbook,
(Mar. 26, 2020),
https://www.urban.org/research/publication/housing-finance-glance-monthly-chartbook-march-2020.

83
Agency MBS are backed by loans guaranteed by Fannie Mae, Freddie Mac, and the Government National Mortgage Association (Ginnie Mae).

On March 15, 2020, the Board announced that it would increase its holdings of agency MBS by at least $200 billion.
84

On March 23, 2020, the Board announced that it would remove this limit and purchase agency MBS “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.”
85

The Board took these actions to stabilize the secondary market and support the continued flow of mortgage credit. With these purchases, market conditions have improved substantially, and the Board has since slowed its pace of purchases.
86

This has helped to stabilize mortgage rates, resulting in a decline in mortgage rates since the Board's intervention.

84
Press Release, Bd. of Governors of the Fed. Reserve Sys.,
Federal Reserve issues FOMC statement
(Mar. 15, 2020),
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm.

85
Press Release, Bd. of Governors of the Fed. Reserve Sys.,
Federal Reserve announces extensive new measures to support the economy
(Mar. 23, 2020),
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm.

86

The Quarterly CARES Act Report to Congress: Hearing Before the S. Comm. on Banking, Housing, and Urban Affairs,
116th Cong. 3 (2020) (statement of Jerome H. Powell, Chairman, Board of Governors of the Federal Reserve System).

Non-agency MBS
87

are generally perceived by investors as riskier than agency MBS, and non-QM lending has declined as a result. Issuance of non-agency MBS declined by 8.2 percent in the first quarter of 2020, with nearly all the transactions completed in January and February, before the COVID-19 pandemic began to affect the economy significantly.
88

Nearly all major non-QM creditors ceased making loans in March and April. In May of 2020, issuers of non-agency MBS began to test the market with deals collateralized by non-QM loans largely originated prior to the crisis. Moreover, several non-QM creditors—which largely depend on the ability to sell loans in the secondary market in order to fund new loans—have begun to resume originations, albeit with a tighter credit box.
89

Prime jumbo financing dropped nearly 22 percent in the first quarter of 2020. Banks increased interest rates and narrowed the product offering to consumers with pristine credit profiles, as these loans must be held on portfolio when the secondary market for non-agency MBS contracts.
90

87
Non-agency MBS are not backed by loans guaranteed by Fannie Mae, Freddie Mac or the Ginnie Mae. This includes securities collateralized by non-QM loans.

88
Brandon Ivey,
Non-Agency MBS Issuance Slowed in First Quarter
(2020),
https://www.insidemortgagefinance.com/articles/217623-non-agency-mbs-issuance-slowed-in-first-quarter.

89
Brandon Ivey,
Non-Agency Mortgage Securitization Opening Up After Pause
(2020),
https://www.insidemortgagefinance.com/articles/218034-non-agency-mortgage-securitization-opening-up-after-pause.

90
Brandon Ivey,
Jumbo Originations Drop Nearly 22% in First Quarter
(2020)
https://www.insidemortgagefinance.com/articles/218028-jumbo-originations-drop-nearly-22-in-first-quarter.

2. Servicing Market Impacts and Implications for Origination Markets

Anticipating that a number of homeowners would struggle to pay their mortgages due to the pandemic and related economic impacts, Congress passed and the President signed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) in March 2020. The CARES Act provides additional protections for borrowers whose mortgages are purchased or securitized by a GSE and certain federally-backed mortgages.
91

The CARES Act mandates a 60-day foreclosure moratorium for such mortgages. The CARES Act also allows borrowers to request up to 180 days of forbearance due to a COVID-19-related financial hardship, with an option to extend the forbearance period for an additional 180 days.

91
Coronavirus Aid, Relief, and Economic Security Act, Public Law 116-136 (2020). (Includes loans backed by HUD, the U.S. Department of the Agriculture, the U.S. Department of Veterans Affairs (VA), Fannie Mae, and Freddie Mac).

Following the passage of the CARES Act, some mortgage servicers remain obligated to make some principal and interest payments to investors in GSE and Ginnie Mae securities, even if consumers are not making payments.
92

Servicers also remain obligated to make escrowed real estate tax and insurance payments to local taxing authorities and insurance companies. Significant liquidity is needed to fulfill servicer obligations to security holders. While servicers are required to hold liquid reserves to cover anticipated advances, significantly higher-than-expected forbearance rates over an extended period of time may lead to liquidity shortages particularly among many non-bank servicers. According to a weekly survey from the Mortgage Bankers Association, from March 2, 2020 to June 7, 2020, the total number of loans in forbearance grew from 0.25 percent to 8.55 percent, with Ginnie Mae loans having the largest growth from 0.19 percent to 11.83 percent.
93

92
The GSEs typically repurchase loans out of the trust after they fall 120 days delinquent, after which the servicer is no longer required to advance principal and interest, but Ginnie Mae requires servicers to advance principal and interest until the default is resolved. On April 21, 2020, the FHFA confirmed that servicers of GSE loans will only be required to advance four months of mortgage payments, regardless of whether the GSEs repurchase the loans from the trust after 120 days of delinquency.

93
Press Release, Mortgage Banker Association,
Share of Mortgage Loans in Forbearance Increases to 8.55%,
(June 15, 2020),
https://www.mba.org/2020-press-releases/june/share-of-mortgage-loans-in-forbearance-increases-to-855.

To address the anticipated liquidity shortage, on April 10, 2020, Ginnie Mae released guidance on a Pass-Through Assistance Program whereby Ginnie Mae will provide financial assistance at a fixed interest rate to servicers facing a principal and interest shortfall as a last resort. On April 7, 2020, Ginnie Mae also announced approval of a servicing advance financing facility, whereby mortgage servicing rights are securitized and sold to private investors. This change may alleviate some of the liquidity pressures that may cause a servicer to draw on the Pass-Through Assistance Program.

Because many mortgage servicers also originate the loans they service, many creditors have responded to the risk of elevated forbearances and higher-than-expected monthly advances by imposing additional underwriting standards for new originations. These new underwriting standards include more stringent requirements for non-QM, jumbo, and government loans.
94

For example, one major bank announced on April 13, 2020, that it would require prospective home purchasers to have a minimum 700 FICO score and 20 percent down payment. By lending only to consumers with high credit scores, lower DTI ratios, or significant liquid reserves, creditors are managing their risk by reducing the likelihood that a newly-originated loan will require a forbearance plan.

94
Maria Volkova,
FHA/VA Lenders Raise Credit Score Requirements
(2020),
https://www.insidemortgagefinance.com/articles/217636-fhava-lenders-raise-fico-credit-score-requirements.

Moreover, several large warehouse providers—
i.e.,
creditors that provide financing to mortgage originators and servicers—have restricted the ability of non-banks to fund loans on their warehouse line by prohibiting the funding of loans to consumers with lower credit scores. These types of restrictions mitigate the warehouse lender's exposure in the event a non-bank fails or is unable to sell the loan prior to the consumer requesting a forbearance.
95

95
On April 22, 2020, the FHFA announced the GSEs would be permitted to purchase certain loans whereby the borrower requested a forbearance prior

to the sale of the loan for a limited period of time and at a higher cost.

As of mid-June, historically low interest rates combined with a leveling off in forbearance rates have resulted in an increase in refinance activity that has been primarily concentrated in the agency sector, helping to mitigate some of the servicing liquidity concerns. However, it is unclear how quickly non-banks will return to the non-QM market even after the mortgage market in general recovers.

III. The Rulemaking Process

The Bureau has solicited and received substantial public and stakeholder input on issues related to this proposed rule. In addition to the Bureau's discussions with and communications from industry stakeholders, consumer advocates, other Federal agencies,
96

and members of Congress, the Bureau issued requests for information (RFIs) in 2017 and 2018 and in July 2019 issued an advance notice of proposed rulemaking regarding the ATR/QM Rule (ANPR). The input from these RFIs and from the ANPR is briefly summarized below.

96
The Bureau has consulted with agencies including the FHFA, the Board, FHA, the FDIC, the OCC, the Federal Trade Commission, the National Credit Union Administration, and the Department of the Treasury.

A. The Requests for Information

In June 2017, the Bureau published a request for information in connection with the Assessment Report (Assessment RFI).
97

In response to the Assessment RFI, the Bureau received approximately 480 comments from creditors, industry groups, consumer advocacy groups, and individuals.
98

The comments addressed a variety of topics, including the General QM loan definition and the 43 percent DTI limit; perceived problems with, and potential changes and alternatives to, appendix Q; and how the Bureau should address the expiration of the Temporary GSE QM loan definition. The comments expressed a range of ideas for addressing the expiration of the Temporary GSE QM loan definition, from making the definition permanent, to applying the definition to other mortgage products, to extending it for various periods of time, or some combination of those suggestions. Other comments stated that the Temporary GSE QM loan definition should be eliminated or permitted to expire.

97
82 FR 25246 (June 1, 2017).

98

See
Assessment Report,
supra
note 58, appendix B (summarizing comments received in response to the Assessment RFI).

Beginning in January 2018, the Bureau issued a general call for evidence seeking comment on its enforcement, supervision, rulemaking, market monitoring, and financial education activities.
99

As part of the call for evidence, the Bureau published requests for information relating to, among other things, the Bureau's rulemaking process,
100

the Bureau's adopted regulations and new rulemaking authorities,
101

and the Bureau's inherited regulations and inherited rulemaking authorities.
102

In response to the call for evidence, the Bureau received comments on the ATR/QM Rule from stakeholders, including consumer advocacy groups and industry groups. The comments addressed a variety of topics, including the General QM loan definition, appendix Q, and the Temporary GSE QM loan definition. The comments also raised concerns about, among other things, the risks of allowing the Temporary GSE QM loan definition to expire without any changes to the General QM loan definition or appendix Q. The concerns raised in these comments were similar to those raised in response to the Assessment RFI, discussed above.

99

See
Bureau of Consumer Fin. Prot., Call for Evidence,
https://www.consumerfinance.gov/policy-compliance/notice-opportunities-comment/archive-closed/call-for-evidence
(last updated Apr. 17, 2018).

100
83 FR 10437 (Mar. 9, 2018).

101
83 FR 12286 (Mar. 21, 2018).

102
83 FR 12881 (Mar. 26, 2018).

B. The Advance Notice of Proposed Rulemaking

On July 25, 2019, the Bureau issued an advance notice of proposed rulemaking regarding the ATR/QM Rule (ANPR). The ANPR stated the Bureau's tentative plans to allow the Temporary GSE QM loan definition to expire in January 2021 or after a short extension, if necessary, to facilitate a smooth and orderly transition away from the Temporary GSE QM loan definition. The Bureau also stated that it was considering whether to propose revisions to the General QM loan definition in light of the potential expiration of the Temporary GSE QM loan definition and requested comments on several topics related to the General QM loan definition. These topics included: (1) Whether and how the Bureau should revise the DTI limit in the General QM loan definition; (2) whether the Bureau should supplement or replace the DTI limit with another method for directly measuring a consumer's personal finances; (3) whether the Bureau should revise appendix Q or replace it with other standards for calculating and verifying a consumer's debt and income; and (4) whether, instead of a DTI limit, the Bureau should adopt standards that do not directly measure a consumer's personal finances.
103

The Bureau requested comment on how much time industry would need to change its practices in response to any changes the Bureau makes to the General QM loan definition.
104

The Bureau received 85 comments on the ANPR from businesses in the mortgage industry (including creditors), consumer advocacy groups, elected officials, individuals, and research centers.

103
84 FR 37155, 37155, 37160-62 (July 31, 2019).

104
The Bureau stated that if the amount of time industry would need to change its practices in response to the rule depends on how the Bureau revises the General QM loan definition, the Bureau requested time estimates based on alternative possible definitions.

1. Direct Measures of a Consumer's Personal Finances

Commenters largely supported moving away from using the 43 percent DTI limit as a stand-alone General QM underwriting criterion. While a few commenters supported maintaining the current General QM loan definition's 43 percent DTI limit as a stand-alone criterion along with clarifying revisions to appendix Q, the large majority of commenters—representing the mortgage industry, consumer advocacy groups, and research centers—supported either eliminating a DTI limit, replacing it with other methods of measuring a consumer's ability to repay, such as cash flow underwriting or residual income, or supplementing it with additional compensating factors. These commenters asserted that, as a stand-alone factor, DTI has limited predictiveness of a consumer's ability to repay and has an adverse impact on responsible access to credit for low-to-moderate income and minority homeowners.

Many commenters suggested the Bureau consider replacing DTI with an alternative measure of a consumer's ability to repay, such as residual income or cash flow underwriting. While some commenters indicated these alternative measures are more accurate predictors of ability to repay, others suggested the Bureau conduct additional studies of these alternative measures and the effectiveness of existing standards, such as the VA's residual income test.

Other commenters suggested the Bureau promulgate a General QM loan definition that allows certain compensating factors to supplement a specific DTI limit. Under this approach, the rule would set a specific DTI limit (
e.g.,
43 percent) but would permit loans with higher DTI ratios to be originated as QMs if the creditor determined that

certain compensating factors were present. Commenters identified several potential compensating factors, including cash reserves or past payment performance history. Advocates for this approach pointed to the GSEs' underwriting standards, which permit loans with DTI ratios between 43 and 50 percent if compensating factors are present, as evidence that higher DTI loans with appropriate consideration of compensating factors can result in affordable loans. Some of the commenters suggested the current General QM loan definition's 43 percent DTI limit could be responsibly increased. Some commenters recommended that the Bureau incorporate compensating factors into the General QM loan definition but also adopt an overall DTI limit above which loans could not be originated as General QMs, regardless of any compensating factors. Under this approach, similar to the GSEs' current underwriting standards, creditors could originate loans under the General QM loan definition with DTI ratios under a certain threshold (
e.g.,
43 percent) without compensating factors, could originate loans under the General QM loan definition with DTI ratios between that threshold and a higher threshold (
e.g.,
50 percent) if the creditor identifies certain compensating factors, but could not originate loans under the General QM loan definition with DTI ratios above the higher threshold.

The Bureau also solicited comment on whether the rule should retain appendix Q as the standard for calculating and verifying debt and income if the rule retains a direct measure of a consumer's personal finances for General QM. Nearly all commenters agreed that appendix Q in its existing form is insufficient—specifically, that the requirements lack clarity in certain areas, which leaves creditors uncertain of the QM status of their loans. Commenters also criticized appendix Q for being overly prescriptive and outdated in other areas and therefore lacking the flexibility to adapt to changing market conditions. Proponents of eliminating the DTI limit entirely stated that appendix Q could be eliminated without replacement and that the Bureau could instead publish supervisory guidance or best practices to assist creditors in satisfying the ATR requirements. Other commenters suggested that the rule supplement appendix Q or replace it with reasonable alternatives that allow for more flexibility, such as the GSE or FHA standards for verifying income and debt. Although most commenters advocated for elimination of appendix Q, the commenters that advocated for retaining appendix Q generally suggested the Bureau should revise appendix Q to modernize the standards and ease industry compliance.

2. Alternatives to Direct Measures of a Consumer's Personal Finances

Many commenters argued that there are alternatives that are more predictive of loan performance and a consumer's ability to repay than stand-alone direct measures of a consumer's personal finances such as DTI or residual income. Most commenters noting these alternatives advocated for eliminating the DTI limit entirely and suggested that loan product features and loan pricing should serve as the primary factors that determine a loan's QM status. Commenters that opposed incorporating alternatives to direct measures of a consumer's personal finances into the General QM loan definition generally argued that a creditor's ATR determination is separate and distinct from a creditor's decision on whether to originate a loan. For example, they argued that because creditors consider factors unrelated to ability to repay in determining their cumulative loss exposure—such as the amount of equity in a property—creditors can originate loans that may not be affordable for consumers in the long-term. Commenters cited asset-based lending prior to the crisis, when some creditors originated unaffordable loans with the intention of refinancing the loan prior to default or otherwise believed they were protected from loss in the event of default due to the consumer's equity in the property. Commenters critical of price-based approaches to the General QM loan definition also stated that loan pricing includes a wide variety of factors unrelated to credit quality, such as the value of the mortgage servicing rights. These commenters also raised concerns about the pro-cyclical nature of loan pricing. They argued that mortgage interest rate spreads tend to contract during economic expansions, such that a price-based approach to the General QM loan definition could grant QM status to loans that exceed consumers' ability to repay and increase housing prices. In contrast, they claimed that mortgage interest rate spreads tend to expand during economic contractions, inhibiting access to credit. Commenters critical of price-based approaches also raised concerns that these approaches are vulnerable to lender manipulation.

Most commenters that advocated for removing the DTI limit entirely from the General QM loan definition suggested the existing General QM protections are sufficient—including the prohibited product features, the points-and-fees cap, and the ATR requirements to consider and verify a consumer's debt, income or assets, DTI, or residual income. They argued that the rule should continue to rely on the interest rate spread between the APR and the APOR to distinguish those QM loans eligible for a safe harbor from those eligible for a rebuttable presumption of compliance. Proponents of this approach argued that creditors use a wide variety of factors in the lending decision and consumers with higher-risk lending attributes receive higher interest rates to compensate creditors and investors for the added risk. Accordingly, these commenters argued that the APR spread above the benchmark APOR is more predictive of the general creditworthiness of a loan and a consumer's ability to repay than stand-alone measures such as DTI. While some commenters suggested that the rule should retain the existing price threshold separating safe harbor QM loans from rebuttable presumption QM loans, which is 1.5 percentage points above APOR for most loans, others suggested that it would be appropriate to increase the threshold. Other commenters suggested there could be an additional pricing threshold, above which loans would be designated as non-QM.

Commenters also provided input on the distinction between a safe harbor presumption of compliance and a rebuttable presumption of compliance with the ATR requirements. While commenters offered different views about whether 1.5 percentage points over APOR is appropriate for distinguishing between safe harbor and rebuttable presumption QMs, or if it should be increased, most commenters advocated for maintaining a safe harbor. However, several consumer advocacy groups suggested all QM loans should be subject to a rebuttable presumption of compliance. Several commenters noted that the 1.5 percentage point over APOR threshold would disproportionately prevent smaller loans and loans for manufactured housing from being originated as QMs. They noted that creditors typically charge more to recover fixed costs on small loans than on larger loans with equivalent risk attributes.

Some commenters advocated for an approach whereby the QM determination would be based primarily on the likelihood of default or loss given default as determined by an underwriting model. One commenter recommended that QM status be

determined by expected default rates in stressed economic conditions, given certain origination characteristics. Other commenters suggested a Bureau-approved automated underwriting model could determine a loan's QM status. Proponents of these approaches argued that an underwriting model would reflect a more holistic consideration of relevant factors but remove the risk that creditors misprice or underprice loans due to competitive pressures. While many commenters acknowledged the operational complexity associated with the Bureau developing and maintaining an automated underwriting model, they argued that this approach would provide creditors with the certainty of a loan's QM status while most accurately assessing the consumer's ability to sustain the mortgage payment.

Commenters also argued that consumer performance over an extended period should be considered sufficient evidence that the creditor adequately assessed a consumer's ability to repay at origination. They recommended that a loan that is originated as a non-QM or rebuttable presumption QM loan should be eligible to “season” into a QM safe harbor loan if the consumer makes timely payments for a pre-determined length of time. Commenters pointed to the GSE representation and warranty framework as precedent for this concept and argued that a creditor's legal exposure to the ATR requirement should also sunset accordingly. However, several commenters opposed allowing loans to season into QMs. They argued that a period of successful repayment is insufficient to presume conclusively that the creditor reasonably determined ability to repay at origination, that creditors would engage in gaming to minimize defaults during the seasoning period, and that seasoning would inappropriately prevent consumers from raising lack of ability to repay as a defense to foreclosure.

The Bureau is considering adding a seasoning approach to the ATR/QM Rule. A seasoning approach would create an alternative pathway to QM safe harbor status for certain mortgages if the consumer has consistently made timely payments for a specified period of time. The Bureau in the near future will issue a separate proposal that addresses adding such an approach to the ATR/QM Rule.

3. Other Temporary GSE QM Loan Issues

As discussed in the ANPR, absent any changes, the Temporary GSE QM loan definition will remain in effect until January 10, 2021 or the date the GSEs exit conservatorship, whichever occurs first. The Bureau sought comment on whether a short extension would be necessary to minimize market disruption and to potentially facilitate an orderly transition to a new General QM loan definition. While some industry and consumer advocates commented that the Temporary GSE QM loan definition should be made permanent, many commenters supported its expiration following a short extension to revise the General QM loan definition. Industry commenters stated that the length of time to implement a new General QM loan definition would largely be determined by the scale and complexity of the revisions to the General QM loan definition. Commenters supporting the price-based approach indicated that a relatively short implementation period likely would be necessary, given the approach would largely be a simplification of the existing General QM construct. Other commenters suggested linking the date of the Temporary GSE QM loan definition expiration to a period following the publication date of the final General QM rule, such as one year. As noted above, the Bureau is issuing a separate NPRM to address the timing of the expiration of the Temporary GSE QM Loan definition.

IV. Legal Authority

The Bureau is proposing to amend Regulation Z pursuant to its authority under TILA and the Dodd-Frank Act. Section 1061 of the Dodd-Frank Act transferred to the Bureau the “consumer financial protection functions” previously vested in certain other Federal agencies, including the Board. The Dodd-Frank Act defines the term “consumer financial protection function” to include “all authority to prescribe rules or issue orders or guidelines pursuant to any Federal consumer financial law, including performing appropriate functions to promulgate and review such rules, orders, and guidelines.”
105

Title X of the Dodd-Frank Act (including section 1061), along with TILA and certain subtitles and provisions of title XIV of the Dodd-Frank Act, are Federal consumer financial laws.
106

105
12 U.S.C. 5581(a)(1)(A).

106
Dodd-Frank Act section 1002(14), 12 U.S.C. 5481(14) (defining “Federal consumer financial law” to include the “enumerated consumer laws” and the provisions of title X of the Dodd-Frank Act), Dodd-Frank Act section 1002(12)(O), 12 U.S.C. 5481(12)(O) (defining “enumerated consumer laws” to include TILA).

A. TILA

TILA section 105(a).
Section 105(a) of TILA directs the Bureau to prescribe regulations to carry out the purposes of TILA and states that such regulations may contain such additional requirements, classifications, differentiations, or other provisions and may further provide for such adjustments and exceptions for all or any class of transactions that the Bureau judges are necessary or proper to effectuate the purposes of TILA, to prevent circumvention or evasion thereof, or to facilitate compliance therewith.
107

A purpose of TILA is “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.”
108

Additionally, a purpose of TILA sections 129B and 129C is to assure that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive, or abusive.
109

As discussed in the section-by-section analysis below, the Bureau is proposing to issue certain provisions of this proposed rule pursuant to its rulemaking, adjustment, and exception authority under TILA section 105(a).

107
15 U.S.C. 1604(a).

108
15 U.S.C. 1601(a).

109
15 U.S.C. 1639b(a)(2).

TILA section 129C(b)(2)(A).
TILA section 129C(b)(2)(A)(vi) provides the Bureau with authority to establish guidelines or regulations relating to ratios of total monthly debt to monthly income or alternative measures of ability to pay regular expenses after payment of total monthly debt, taking into account the income levels of the borrower and such other factors as the Bureau may determine relevant and consistent with the purposes described in TILA section 129C(b)(3)(B)(i).
110

As discussed in the section-by-section analysis below, the Bureau is proposing to issue certain provisions of this proposed rule pursuant to its authority under TILA section 129C(b)(2)(A)(vi).

110
15 U.S.C. 1639c(b)(2)(A).

TILA section 129C(b)(3)A), (B)(i).
TILA section 129C(b)(3)(B)(i) authorizes the Bureau to prescribe regulations that revise, add to, or subtract from the criteria that define a QM upon a finding that such regulations are necessary or proper to ensure that responsible, affordable mortgage credit remains available to consumers in a manner consistent with the purposes of TILA section 129C; or are necessary and appropriate to effectuate the purposes of

TILA sections 129B and 129C, to prevent circumvention or evasion thereof, or to facilitate compliance with such sections.
111

In addition, TILA section 129C(b)(3)(A) directs the Bureau to prescribe regulations to carry out the purposes of section 129C.
112

As discussed in the section-by-section analysis below, the Bureau is proposing to issue certain provisions of this proposed rule pursuant to its authority under TILA section 129C(b)(3)(B)(i).

111
15 U.S.C. 1639c(b)(3)(B)(i).

112
15 U.S.C. 1639c(b)(3)(A).

B. Dodd-Frank Act

Dodd-Frank Act section 1022(b).
Section 1022(b)(1) of the Dodd-Frank Act authorizes the Bureau to prescribe rules to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof.
113

TILA and title X of the Dodd-Frank Act are Federal consumer financial laws. Accordingly, the Bureau is proposing to exercise its authority under Dodd-Frank Act section 1022(b) to prescribe rules that carry out the purposes and objectives of TILA and title X and prevent evasion of those laws.

113
12 U.S.C. 5512(b)(1).

V. Why the Bureau Is Issuing This Proposal

The Bureau is issuing this proposal to amend the General QM loan definition because it is concerned that retaining the existing General QM loan definition with the 43 percent DTI limit after the Temporary GSE QM loan definition expires would significantly reduce the size of QM and could significantly reduce access to responsible, affordable credit. The Bureau is proposing a price-based General QM loan definition to replace the DTI-based approach because it preliminarily concludes that a loan's price, as measured by comparing a loan's APR to APOR for a comparable transaction, is a strong indicator of a consumer's ability to repay and is a more holistic and flexible measure of a consumer's ability to repay than DTI alone.

Under the proposal, a loan would meet the General QM loan definition in § 1026.43(e)(2) only if the APR exceeds APOR for a comparable transaction by less than two percentage points as of the date the interest rate is set. The proposal would provide higher thresholds for loans with smaller loan amounts and for subordinate-lien transactions. The proposal would retain the existing product-feature and underwriting requirements and limits on points and fees. Although the proposal would remove the 43 percent DTI limit from the General QM loan definition, the proposal would require that the creditor consider and verify the consumer's current or reasonably expected income or assets other than the value of the dwelling (including any real property attached to the dwelling) that secures the loan and the consumer's current debt obligations, alimony, and child support. The proposal would remove appendix Q. To prevent uncertainty that may result from appendix Q's removal, the proposal would clarify the requirements to consider and verify a consumer's income, assets, debt obligations, alimony, and child support. The proposal would preserve the current threshold separating safe harbor from rebuttable presumption QMs, under which a loan is a safe harbor QM if its APR exceeds APOR for a comparable transaction by less than 1.5 percentage points as of the date the interest rate is set (or by less than 3.5 percentage points for subordinate-lien transactions).

The Bureau is proposing a price-based approach to replace the specific DTI limit because it is concerned that imposing a DTI limit as a condition for QM status under the General QM loan definition may be overly burdensome and complex in practice and may unduly restrict access to credit because it provides an incomplete picture of the consumer's financial capacity. In particular, the Bureau is concerned that conditioning QM status on a specific DTI limit may impair access to credit for some consumers for whom it might be appropriate to presume ability to repay for their loans at consummation. For the reasons set forth below, the Bureau preliminarily concludes that a price-based General QM loan definition is appropriate because a loan's price, as measured by comparing a loan's APR to APOR for a comparable transaction, is a strong indicator of a consumer's ability to repay and is a more holistic and flexible measure of a consumer's ability to repay than DTI alone.

A. Overview of the General QM Loan Definition DTI Limit

As discussed above, TILA section 129C(b)(2) defines QM by limiting certain loan terms and features. The statute generally prohibits a QM from permitting an increase of the principal balance on the loan (negative amortization), interest-only payments, most balloon payments, a term greater than 30 years, and points and fees that exceed a specified threshold. In addition, the statute incorporates limited underwriting criteria that overlap with some elements of the general ATR standard, including prohibiting “no-doc” loans where the creditor does not verify income or assets. TILA does not require DTI ratios to be included in the definition of a QM. Rather, the statute authorizes, but does not require, the Bureau to establish additional criteria relating to monthly DTI ratios, or alternative measures of ability to pay regular expenses after payment of total monthly debt, taking into account the income levels of the consumer and other factors the Bureau determines relevant and consistent with the purposes described in TILA section 129C(b)(3)(B)(i).

The Board's 2011 ATR/QM Proposal.
In the 2011 ATR/QM Proposal, the Board proposed two alternative approaches to the General QM loan definition to implement the statutory QM requirements.
114

The proposed alternatives differed in the extent to which, in addition to the statutory QM requirements, they included factors from the ATR standard, including consideration of the consumer's monthly DTI ratio.

114
76 FR 27390, 27453 (May 11, 2011).

Alternative 1 under the Board's proposal would have included only the statutory QM requirements and would not have incorporated the consumer's DTI ratio, residual income, or other factors from the general ATR standard.
115

Among the reasons the Board cited in support of proposed Alternative 1 was a concern that DTI ratios (and residual income) are not objective and would not provide certainty that a loan is in fact a QM.
116

The Board also cited data showing that a consumer's DTI ratio generally does not have a significant predictive power of loan performance, once the effects of credit history, loan type, and loan-to-value (LTV) ratio are considered.
117

The Board was also concerned that the benefit of including DTI ratio (or residual income) requirements in the definition of QM may not outweigh the risk of reduced credit availability for certain consumers who may not meet widely accepted DTI ratio standards but may have other compensating factors, such as sufficient residual income or other resources, to be able to reasonably afford the mortgage.
118

Proposed Alternative 1 would have provided creditors with a safe harbor to establish compliance with the ATR requirements.

115

Id.
at 27453.

116

Id.
at 27454.

117

Id.

118

Id.

Proposed Alternative 2 would have included the statutory QM requirements

and additional factors from the general ATR standard, including a requirement to consider and verify the consumer's DTI ratio or residual income.
119

The Board expressed concern that, absent a DTI ratio or residual income requirement, a creditor could originate a QM without considering the effect of the new loan payment on the consumer's overall financial picture.
120

The Board did not propose a specific limit for the DTI ratio in the QM definition as part of Alternative 2.
121

The Board cited several reasons for not proposing a specific DTI limit. First, the Board was concerned that setting a specific DTI ratio threshold could limit credit availability without providing adequate off-setting benefits.
122

Second, outreach conducted by the Board revealed a range of underwriting guidelines for DTI ratios based on product type, whether creditors used manual or automated underwriting, and special considerations for high- and low-income consumers.
123

The Board was concerned that setting a specific limit would require addressing the operational issues related to the calculation of the DTI ratio, including defining debt and income.
124

The Board was also concerned that a specific limit would require tolerance provisions to account for mistakes made in calculating the DTI ratio.
125

At the same time, the Board recognized that creditors and consumers may benefit from a higher degree of certainty surrounding the QM definition.
126

Therefore, the Board solicited comment on whether and how it should prescribe a specific limit for the DTI ratio or residual income for the QM definition.
127

The Board's Alternative 2 would have provided a rebuttable presumption of compliance with the ATR requirements.

119

Id.

120

Id.
at 27455.

121

Id.
at 27460.

122

Id.

123

Id.
at 27461.

124

Id.

125

Id.

126

Id.

127

Id.

The Bureau's January 2013 Final Rule.
The Bureau's January 2013 Final Rule included the statutory QM factors and additional factors from the general ATR standard in the General QM loan definition in § 1026.43(e)(2). However, instead of incorporating the approach to DTI from the ATR standard, which requires a creditor to consider the consumer's DTI ratio or residual income, the Bureau prescribed for the General QM loan definition a specific DTI limit of 43 percent in § 1026.43(e)(2)(vi). In adopting this approach, the Bureau explained that it believed the QM criteria should include a standard for evaluating the consumer's ability to repay, in addition to the product feature restrictions and other requirements that are specified in TILA.
128

The Bureau stated that the TILA ATR/QM provisions are fundamentally about assuring that the mortgage loan that consumers receive is affordable, and that the protection from liability afforded to QMs would not be reasonable if the creditor made the loan without considering and verifying certain core aspects of the consumer's financial picture.
129

128
78 FR 6408, 6516 (Jan. 30, 2013).

129

Id.
at 6516.

With respect to DTI, the Bureau noted that DTI ratios are widely used for evaluating a consumer's ability to repay over time because, as the available data showed, DTI ratio correlates with loan performance as measured by delinquency rate.
130

The January 2013 Final Rule noted that, at a basic level, the lower the DTI ratio, the greater the consumer's ability to pay back a mortgage loan.
131

The Bureau believed this relationship between the DTI ratio and the consumer's ability to repay applied both under conditions as they exist at consummation, as well as under future changed circumstances, such as increases in payments for adjustable-rate mortgages (ARMs), future reductions in income, and unanticipated expenses and new debts.
132

The Bureau's findings regarding DTI ratios relied primarily on analysis of the FHFA's Historical Loan Performance (HLP) dataset, data provided by FHA, and data provided by commenters.
133

The Bureau believed these data indicated that DTI ratios correlate with loan performance, as measured by delinquency rate (where delinquency is defined as being over 60 days late), in any credit cycle.
134

Within a typical range of DTI ratios creditors use in underwriting (
e.g.,
under 32 percent DTI to 46 percent DTI), the Bureau noted that generally, there is a gradual increase in delinquency with higher DTI ratio.
135

The Bureau also noted that DTI ratios are widely used as an important part of the underwriting processes for both governmental programs and private lenders.
136

130

Id.
at 6526-27.

131

Id.
at 6526.

132

Id.
at 6526-27.

133

Id.
at 6527.

134

Id.

135

Id.
(citing 77 FR 33120, 33122-23 (June 5, 2012) (Table 2: Ever 60+ Delinquency Rates, summarizing the HLP dataset by volume of loans and percentage that were ever 60 days or more delinquent, tabulated by the total DTI on the loans and year of origination)).

136

Id.

To provide certainty for creditors regarding the loan's QM status, the January 2013 Final Rule contained a specific DTI limit of 43 percent as part of the General QM loan definition. The Bureau stated that a specific DTI limit also provides certainty to assignees and investors in the secondary market, which the Bureau believed would help reduce concerns regarding legal risk and promote credit availability.
137

The Bureau noted that numerous commenters had highlighted the value of providing objective requirements determined based on information contained in loan files.
138

To that end, the Bureau provided definitions of debt and income for purposes of the General QM loan definition in appendix Q, to address concerns that creditors may not have adequate certainty about whether a particular loan satisfies the requirements of the General QM loan definition.
139

137

Id.

138

Id.

139

Id.

The Bureau selected 43 percent as the DTI limit for the General QM loan definition because, based on analysis of data available at the time and comments, the Bureau believed that the 43 percent limit would advance TILA's goals of creditors not extending credit that consumers cannot repay while still preserving consumers' access to credit.
140

The Bureau acknowledged that there is no specific threshold that separates affordable from unaffordable mortgages; rather, there is a gradual increase in delinquency rates as DTI ratios increase.
141

Additionally, the Bureau noted that a 43 percent DTI ratio was within the range used by many creditors, generally comported with industry standards and practices for prudent underwriting, and was the threshold used by FHA as its general boundary at the time the Bureau issued the January 2013 Final Rule.
142

The Bureau noted concerns about setting a higher DTI limit, including concerns that it could allow QM status for mortgages for which there is not a sound reason to presume that the creditor had a reasonable belief in the consumer's ability to repay.
143

The Bureau was especially concerned about this in the context of QMs that receive a safe harbor from the ATR requirements.

144

The Bureau was also concerned that a higher DTI limit would result in a QM boundary that substantially covered the entire mortgage market. If that were the case, creditors might be unwilling to make non-QM loans, and the Bureau was concerned that the QM rule would define the limit of credit availability.
145

The Bureau also suggested that a higher DTI limit might require a corresponding weakening of the strength of the presumption of compliance, which the Bureau believed would largely defeat the point of adopting a higher DTI limit.
146

140

Id.

141

Id.

142

Id.

143

Id.
at 6528.

144

Id.

145

Id.

146

Id.

Despite the Bureau's inclusion of a specific DTI limit in the General QM loan definition, the Bureau also acknowledged concerns about the requirement. The Bureau acknowledged that the Board, in issuing the 2011 ATR/QM Proposal, found that DTI ratios may not have significant predictive power, once the effects of credit history, loan type, and LTV ratio are considered.
147

Similarly, the Bureau noted that some commenters responding to the 2011 ATR/QM Proposal suggested that the Bureau should include compensating factors in addition to a specific DTI ratio threshold due to concerns about restricting access to credit.
148

The Bureau acknowledged that a standard that takes into account multiple factors may produce more accurate ability-to-repay determinations, at least in specific cases, but was concerned that incorporating a multi-factor test or compensating factors into the QM definition would undermine the certainty for creditors and the secondary market of whether loans were eligible for QM status.
149

The Bureau also acknowledged arguments that residual income—generally defined as the monthly income that remains after a consumer pays all personal debts and obligations, including the prospective mortgage—may be a better measure of repayment ability.
150

However, the Bureau noted that it lacked sufficient data to mandate a bright-line rule based on residual income.
151

The Bureau anticipated further study of the issue as part of the five-year assessment of the rule.
152

147

Id.
at 6527.

148

Id.

149

Id.

150

Id.
at 6528.

151

Id.

152

Id.

The Bureau acknowledged in the January 2013 Final Rule that the 43 percent DTI limit in the General QM loan definition could restrict access to credit given market conditions at the time the rule was issued. Among other things, the Bureau expressed concern that, as the mortgage market recovered from the financial crisis, there would be a limited non-QM market, which, in conjunction with the 43 percent DTI limit, could impair access to credit for consumers with DTI ratios over 43 percent.
153

To preserve access to credit for such consumers while the market recovered, the Bureau adopted the Temporary GSE QM loan definition, which did not include a specific DTI limit. As discussed below, the Temporary GSE QM loan definition continues to play a significant role in ensuring access to credit for consumers.

153

Id.
at 6533.

B. Considerations Related to the General QM Loan Definition DTI Limit

The Bureau's own experience and the feedback it has received from stakeholders since issuing the January 2013 Final Rule suggest that imposing a DTI limit as a condition for QM status under the General QM loan definition may be overly burdensome and complex in practice and may unduly restrict access to credit because it provides an incomplete picture of the consumer's financial capacity. While the Bureau acknowledges that DTI ratios generally correlate with loan performance, as the Bureau found in the January 2013 Final Rule and as shown in recent Bureau analysis described below, the Bureau also notes that a consumer's DTI ratio is only one way to measure financial capacity and is not a holistic measure of the consumer's ability to repay.

In particular, the Bureau is concerned that imposing a DTI limit as a condition for QM status under the General QM loan definition may deny QM status for loans to some consumers for whom it might be appropriate to presume ability to repay at consummation, and that denying QM status to such loans risks denying consumers access to responsible, affordable credit. Numerous stakeholders, including commenters responding to the ANPR, have argued that the current approach to DTI ratios as part of the General QM loan definition is not appropriate because it creates problems for some consumers' ability to access credit when their DTI ratio is above a bright-line threshold. These access to credit concerns are especially acute for lower-income and minority consumers.

The Bureau acknowledges that the current approach to DTI ratios under the General QM loan definition may also stifle innovation in underwriting because it focuses on a single metric, with strict verification rules. The current approach to DTI ratios under the General QM loan definition may constrain new approaches to assessing repayment ability, including the use of technology as part of the underwriting process. Such innovations include certain new uses of cash flow data and analytics to underwrite mortgage applicants. This emerging technology has the potential to accurately assess consumers' ability to repay using, for example, bank account data that can identify the source and frequency of recurring deposits and payments and identify remaining disposable income. Identifying the remaining disposable income could be a method of assessing the consumer's residual income and could potentially satisfy a requirement to consider either DTI or residual income, absent a specific DTI limit. This innovation could potentially expand access to responsible, affordable mortgage credit, particularly for applicants with non-traditional income and limited credit history. The potential negative effect of the rule on innovation in underwriting may be heightened while the market is largely concentrated in the QM lending space and may limit access to credit for some consumers with DTI ratios above 43 percent.

The Bureau's 2019 ATR/QM Assessment Report highlights the tradeoffs of conditioning the General QM loan definition on a DTI limit. The Assessment Report included specific findings about the General QM loan definition's DTI limit, including certain findings related to DTI ratios as probative of a consumer's ability to repay. The Assessment Report found that loans with higher DTI ratios have been associated with higher levels of “early delinquency” (
i.e.,
delinquency within two years of origination), which, as explained below, may serve as a proxy for measuring whether a consumer had a reasonable ability to repay at the time the loan was consummated.
154

For example, the Assessment Report notes that for all periods and samples studied, a positive relationship between DTI ratios and early delinquency is present and economically meaningful.
155

The Assessment Report states that higher DTI ratios independently increase expected early delinquency, regardless of other underwriting criteria.
156

154

See
Assessment Report,
supra
note 58, at 83-84, 100-05.

155
Assessment Report at 104-05.

156

Id.
at 105.

At the same time, findings from the Assessment Report indicate that the specific 43 percent DTI limit in the

current rule has restricted access to credit, particularly in the absence of a robust non-QM market. The report found that, for high-DTI consumers—
i.e.,
consumers with DTI ratios above 43 percent—who qualify for loans eligible for purchase or guarantee by the GSEs, the Rule has not decreased access to credit.
157

However, the Assessment Report attributes the fact that the 43 percent DTI limit has not reduced access to credit for such consumers to the existence of the Temporary GSE QM loan definition. The findings in the Assessment Report indicate that there would be some reduction in access to credit for high-DTI consumers when the Temporary GSE QM loan definition expires, absent changes to the General QM loan definition. For example, based on application-level data obtained from nine large lenders, the Assessment Report found that the January 2013 Final Rule eliminated between 63 and 70 percent of non-GSE eligible, high-DTI home purchase loans.
158

The Bureau is concerned about a similar effect for loans with DTI ratios above 43 percent when the Temporary GSE QM loan definition expires. The Bureau acknowledges that the Assessment Report's finding, without other information, does not prove or disprove the effectiveness of the DTI limit in achieving the purposes of the January 2013 Final Rule in ensuring consumers' ability to repay the loan. If the denied applicants in fact lacked the ability to repay, then the reduction in approval rates is an appropriate consequence of the Rule. However, if the denied applicants did have the ability to repay, then these data suggest an unintended consequence of the Rule. This possibility is supported by the fact that other findings in the Assessment Report suggest that applicants for high-DTI ratio, non-GSE eligible loans are being denied, even though other compensating factors indicate that some of them may have the ability to repay their loans.
159

157

See, e.g., id.
at 10, 194-96.

158

See, e.g., id.
at 10-11, 117, 131-47.

159

See, e.g.,
Assessment Report
supra
note 58, at 150, 153, Table 20. Table 20 illustrates how the pool of denied non-GSE eligible high-DTI applicants has changed between 2013 and 2014. After the introduction of the Rule, the pool of denied applicants contains more consumers with higher incomes, higher FICO scores, and higher down payments.

The current state of the non-QM market heightens the access to credit concerns related to the specific 43 percent DTI limit, particularly if such conditions persist after the expiration of the Temporary GSE QM loan definition. The Bureau stated in the January 2013 Final Rule that it believed mortgages that could be responsibly originated with DTI ratios that exceed 43 percent, which historically includes over 20 percent of mortgages, would be made under the general ATR standard.
160

However, the Assessment Report found that a robust market for non-QM loans above the 43 percent DTI limit has not materialized as the Bureau had predicted. Therefore, there is limited capacity in the non-QM market to provide access to credit after the expiration of the Temporary GSE QM loan definition.
161

As described above, the non-QM market has been further reduced by the recent economic disruptions associated with the COVID-19 pandemic, with most mortgage credit now available in the QM lending space. The Bureau acknowledges that the slow development of the non-QM market, and the recent economic disruptions associated with the COVID-19 pandemic that may significantly hinder its development in the near term, may further reduce access to credit outside the QM space.

160
78 FR 6408, 6527 (Jan. 30, 2013).

161
Assessment Report,
supra
note 58, at 198.

The Bureau also has particular concerns about the effects of the appendix Q definitions of debt and income on access to credit. The Bureau intended for appendix Q to provide creditors with certainty about the DTI ratio calculation to foster compliance with the General QM loan definition. However, based on extensive stakeholder feedback and its own experience, the Bureau recognizes that appendix Q's definitions of debt and income are rigid and difficult to apply and do not provide the level of compliance certainty that the Bureau anticipated. Stakeholders have reported that these concerns are particularly acute for transactions involving self-employed consumers, consumers with part-time employment, and consumers with irregular or unusual income streams. The standards in appendix Q could negatively impact access to credit for these consumers, particularly after expiration of the Temporary GSE QM loan definition. The Assessment Report also noted concerns with the perceived lack of clarity in appendix Q and found that such concerns “may have contributed to investors'—and at least derivatively, creditors'—preference” for Temporary GSE QM loans.
162

Appendix Q, unlike other standards for calculating and verifying debt and income, has not been revised since 2013.
163

The current definitions of debt and income in appendix Q have proven to be complex in practice, and, as discussed below, the Bureau has concerns about other potential approaches to defining debt and income in connection with conditioning QM status on a specific DTI limit.

162

Id.
at 193.

163

Id.
at 193-94.

At the time of the January 2013 Final Rule, the Bureau sought to provide a period for economic, market, and regulatory conditions to stabilize and for a reasonable transition period to the General QM loan definition and non-QM loans above a 43 percent DTI ratio. However, contrary to the Bureau's expectations, lending largely has remained in the Temporary GSE QM loan space, and a robust and sizable market to support non-QM lending has not yet emerged.
164

As noted above, the Bureau acknowledges that the recent economic disruptions associated with the COVID-19 pandemic may further hinder development of the non-QM market, at least in the near term. The Bureau expects that a significant number of Temporary GSE QM loans would not qualify as General QM loans under the current rule after the Temporary GSE QM loan definition expires, either because they have DTI ratios above 43 percent or because their method of documenting and verifying income or debt is incompatible with appendix Q. Although alternative loan options would still be available to many consumers after expiration of the Temporary GSE QM loan definition, the Bureau anticipates that, with respect to loans that are currently Temporary GSE QM loans and would not otherwise qualify as General QM loans under the current definition, some would cost materially more for consumers and some would not be made at all.

164

Id.
at 198.

Specifically, the Bureau's Dodd-Frank Act 1022(b) Analysis, below, estimates that, as a result of the General QM loan definition's 43 percent DTI limit, approximately 957,000 loans—16 percent of all closed-end first-lien residential mortgage originations in 2018—would be affected by the expiration of the Temporary GSE QM loan definition.
165

An additional, smaller number of loans that currently qualify as Temporary GSE QM loans may not fall within the General QM loan definition after expiration of the Temporary GSE QM loan definition because the method used for verifying income or debt would not comply with

appendix Q.
166

The Temporary GSE QM loan definition is currently set to expire upon the earlier of January 10, 2021 or when GSE conservatorship ends, and the Bureau believes that many loans currently originated under the Temporary GSE QM loan definition may cost materially more or may not be made at all, absent changes to the General QM loan definition. After the Temporary GSE QM loan definition expires, the Bureau expects that many consumers with DTI ratios above 43 percent who would have received a Temporary GSE QM loan would instead obtain FHA-insured loans since FHA currently insures loans with DTI ratios up to 57 percent.
167

The number of loans that move to FHA would depend on FHA's willingness and ability to insure such loans, whether FHA continues to treat all loans that it insures as QMs under its own QM rule, and how many loans that would have been originated as Temporary GSE QM loans with DTI ratios above 43 percent exceed FHA's loan-amount limit.
168

For example, the Bureau estimates that, in 2018, 11 percent of Temporary GSE QM loans with DTI ratios above 43 percent exceeded FHA's loan-amount limit.
169

Thus, the Bureau considers that at most 89 percent of loans that would have been Temporary GSE QM loans with DTI ratios above 43 percent could move to FHA.
170

The Bureau expects that loans that are originated as FHA loans instead of under the Temporary GSE QM loan definition generally would cost materially more for many consumers.
171

The Bureau expects that some consumers offered FHA loans may choose not to take out a mortgage because of these higher costs.

165
Dodd-Frank Act section 1022(b) (analysis cites the Bureau's prior estimate of affected loans in the ANPR);
see
84 FR 37155, 37159 (July 31, 2019).

166

Id.
at 37159 n.58.

167
In fiscal year 2019, approximately 57 percent of FHA-insured purchase mortgages had a DTI ratio above 43 percent. U.S. Dep't of Hous. & Urban Dev.,
Annual Report to Congress Regarding the Financial Status of the FHA Mutual Mortgage Insurance Fund, Fiscal Year 2019,
at 33 using data from App. B Tabl. B9 (Nov. 14, 2018),
https://www.hud.gov/sites/dfiles/Housing/documents/2019FHAAnnualReportMMIFund.pdf.

168
84 FR 37155, 37159 (July 31, 2019).

169

Id.
In 2018, FHA's county-level maximum loan limits ranged from $294,515 to $679,650 in the continental United States.
See
U.S. Dep't of Hous. & Urban Dev.,
FHA Mortgage Limits, https://entp.hud.gov/idapp/html/hicostlook.cfm
(last visited June 21, 2020).

170
84 FR 37155, 37159 (July 31, 2019).

171
Interest rates and insurance premiums on FHA loans generally feature less risk-based pricing than conventional loans, charging more similar rates and premiums to all consumers. As a result, they are likely to cost more than conventional loans for consumers with stronger credit scores and larger down payments. Consistent with this pricing differential, consumers with higher credit scores and larger down payments chose FHA loans relatively rarely in 2018 HMDA data on mortgage originations.
See
Bureau of Consumer Fin. Prot.,
Introducing New and Revised Data Points in HMDA,
August 2019,
https://files.consumerfinance.gov/f/documents/cfpb_new-revised-data-points-in-hmda_report.pdf.

It is also possible that some consumers with DTI ratios above 43 percent would be able to obtain loans in the private market.
172

The ANPR noted that the number of loans absorbed by the private market would likely depend, in part, on whether actors in the private market are willing to assume the legal or credit risk associated with funding—as non-QM loans or small-creditor portfolio QM loans—loans that would have been Temporary GSE QM loans (with DTI ratios above 43 percent)
173

and, if so, whether actors in the private market would offer more competitive pricing or terms.
174

For example, the Bureau estimates that 55 percent of loans that would have been Temporary GSE QM loans (with DTI ratios above 43 percent) in 2018 had credit scores at or above 680 and LTV ratios at or below 80 percent—credit characteristics traditionally considered attractive to actors in the private market.
175

The ANPR also noted that there are certain built-in costs to FHA loans—namely, mortgage insurance premiums—which could be a basis for competition, and that depository institutions in recent years have shied away from originating and servicing FHA loans due to the obligations and risks associated with such loans.
176

At the same time, the Assessment Report found there has been limited momentum toward a greater role for private market non-QM loans. It is uncertain how great this role will be in the future,
177

particularly in the short term due to the economic effects of the COVID-19 pandemic. Finally, the ANPR noted that some consumers with DTI ratios above 43 percent who would have sought Temporary GSE QM loans may adapt to changing options and make different choices, such as adjusting their borrowing to result in a lower DTI ratio.
178

However, some consumers who would have sought Temporary GSE QM loans (with DTI ratios above 43 percent) may not obtain loans at all.
179

For example, based on application-level data obtained from nine large lenders, the Assessment Report found that the January 2013 Final Rule eliminated between 63 and 70 percent of non-GSE eligible, high-DTI home purchase loans.
180

172
84 FR 37155, 37159 (July 31, 2019).

173

See
12 CFR 1026.43(e)(5) (extending QM status to certain portfolio loans originated by certain small creditors). In addition, section 101 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, Public Law 115-174, 132 Stat. 1296 (2018), amended TILA to add a safe harbor for small creditor portfolio loans.
See
15 U.S.C. 1639c(b)(2)(F).

174
84 FR 37155, 37159 (July 31, 2019).

175

Id.

176

Id.

177

Id.

178

Id.

179

Id.

180

See
Assessment Report
supra
note 58, at 10-11, 117, 131-47.

In the separate Extension Proposal, the Bureau is proposing to replace the January 10, 2021 sunset date with a provision that would amend the Temporary GSE QM loan definition so that it would expire upon the earlier of the effective date of final amendments to the General QM loan definition, or when GSE conservatorship ends.
181

The Bureau is issuing that separate proposal to ensure that responsible, affordable credit remains available to consumers who may be affected if the Temporary GSE QM loan definition expires before amendments to the General QM loan definition take effect.

181
As the Bureau notes in the separate Extension Proposal, the Bureau does not intend for the effective date of final amendments to the General QM loan definition to be prior to April 1, 2021. Thus, the Bureau does not intend for the Temporary GSE QM loan definition to expire prior to April 1, 2021.

C. Why the Bureau Is Proposing a Price-Based QM Definition To Replace the General QM Loan Definition DTI Limit

Given the significant issues associated with the 43 percent DTI limit, the Bureau is proposing to remove that requirement from the General QM loan definition in § 1026.43(e)(2)(vi) and replace it with a requirement based on the price of the loan. Specifically, in addition to the statutory product features and underwriting restrictions that apply under the current rule, a loan would meet the General QM loan definition only if the APR exceeds APOR for a comparable transaction by less than two percentage points as of the date the interest rate is set. The proposal would provide higher thresholds for loans with smaller loan amounts and for subordinate-lien transactions. Although the proposal would remove the 43 percent DTI limit from the General QM loan definition, it would require that the creditor: (1) Consider the consumer's income or assets, debt obligations, alimony, and child support, and monthly DTI ratio or residual income, and (2) verify the consumer's current or reasonably expected income or assets other than the value of the dwelling (including any real property attached to the dwelling) that secures the loan and the consumer's current debt obligations, alimony, and child support. The proposal would remove appendix Q but would clarify the requirements to consider and verify a consumer's

income, assets, debt obligations, alimony, and child support, to help prevent compliance uncertainty that could otherwise result from the removal of appendix Q. Consistent with the current rule, the proposal would preserve the current threshold separating safe harbor from rebuttable presumption QMs, under which a loan is a safe harbor QM if its APR exceeds APOR for a comparable transaction by less than 1.5 percentage points as of the date the interest rate is set.
182

182
The current rule provides a higher safe harbor threshold of 3.5 percentage points over APOR for small creditor portfolio QMs and balloon-payment QMs made by certain small creditors pursuant to § 1026.43(e)(5), (e)(6) and (f).
See
§ 1026.43(b)(4). This proposal would not alter those thresholds.

The Bureau acknowledges there is significant debate over whether loan pricing, a consumer's DTI ratio, or another direct or indirect measure of a consumer's personal finances is a better predictor of loan performance, particularly when analyzed across various points in the economic cycle.
183

Some commenters responding to the ANPR advocated for retaining a DTI requirement as part of the General QM loan definition, arguing that it is a strong indicator of a consumer's ability to repay. Other commenters suggested a range of options to replace the current DTI requirement in the General QM loan definition, including by prescribing a residual income test; allowing compensating factors (such as LTV ratios and credit scores) in conjunction with a DTI ratio; and defining QM by reference to widely used underwriting standards. In seeking comments on this proposal, the Bureau is not determining whether DTI ratios, a loan's price, or some other measure is the best predictor of loan performance. As discussed below, analysis provided by stakeholders and the Bureau's own analysis show that pricing is strongly correlated with loan performance, based on early delinquency rates, across a variety of loans and economic conditions. However, the Bureau acknowledges that DTI is also predictive of loan performance and that other direct and indirect measures of consumer finances may also be predictive of loan performance. The Bureau does not make a finding here on whether or to what extent one measure clearly outperforms others in predicting loan performance. Rather, the Bureau has weighed several policy considerations in selecting an approach for the proposal based on the purposes of the ATR/QM provisions of TILA.

183

See, e.g.,
Norbert Michel,
The Best Housing Finance Reform Options for the Trump Administration,
Forbes (July 15, 2019),
https://www.forbes.com/sites/norbertmichel/2019/07/15/the-best-housing-finance-reform-options-for-the-trump-administration/#4f5640de7d3f;
Eric Kaplan
et al.,
Milken Institute,
A Blueprint for Administrative Reform of the Housing Finance System,
at 17 (Jan. 2019),
https://assets1b.milkeninstitute.org/assets/Publication/Viewpoint/PDF/Blueprint-Admin-Reform-HF-System-1.7.2019-v2.pdf
(suggesting that the Bureau both (1) expand the 43 percent DTI limit to 45 percent to move market share of higher-DTI loans from the GSEs and FHA to the non-agency market, and (2) establish a residual income test to protect against the risk of higher DTI loans); Morris Davis
et al., A Quarter Century of Mortgage Risk
(FHFA, Working Paper 19-02, 2019),
https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/wp1902.aspx
(examining various loan characteristics and a summary measure of risk—the stressed default rate—for predictiveness of loan performance).

In particular, the Bureau has balanced considerations related to ensuring consumers' ability to repay and maintaining access to credit in deciding to seek comment on replacing the current 43 percent DTI limit with a price-based approach. The Bureau continues to view the statute as fundamentally about assuring that consumers receive mortgage credit that they are able to repay. However, the Bureau is also concerned about maintaining access to responsible, affordable mortgage credit. The Bureau is concerned that the current General QM loan definition, with a 43 percent DTI limit, would result in a significant reduction in the scope of QM and could reduce access to responsible, affordable mortgage credit after the Temporary GSE QM loan definition expires. The lack of a robust non-QM market enhances those concerns. Although the Bureau noted in the January 2013 Final Rule that it expected access to credit outside of the QM lending space to develop over time, the Assessment Report found that a robust and sizable market to support non-QM lending has not emerged since the Rule took effect.
184

The Bureau also acknowledges that the non-QM market has been further reduced by the recent economic disruptions associated with the COVID-19 pandemic, with most mortgage credit now available in the QM lending space. Although it remains possible that, over time, a substantial market for non-QM loans will emerge, that market has developed slowly, and the recent economic disruptions associated with the COVID-19 pandemic may significantly hinder its development, at least in the near term.

184
Assessment Report,
supra
note 58, at 198.

With respect to ability to repay, the Bureau has focused on analysis of early delinquency rates to evaluate whether a loan's price, as measured by the spread of APR over APOR (herein referred to as the loan's rate spread), may be an appropriate measure of whether a loan should be presumed to comply with the ATR provisions. Because the affordability of a given mortgage will vary from consumer to consumer based upon a range of factors, there is no single recognized metric, or set of metrics, that can directly measure whether the terms of mortgage loans are reasonably within consumers' ability to repay.
185

As such, consistent with the Bureau's prior analyses in the Assessment Report, the Bureau uses early distress as a proxy for the lack of the consumer's ability to repay at consummation across a wide pool of loans. Consistent with the Assessment Report, for the analyses of early delinquency rates below, the Bureau measures early distress as whether a consumer was ever 60 or more days past due within the first 2 years after origination (referred to herein as the early delinquency rate).
186

The Bureau's analysis focuses on early delinquency rates to capture consumers' difficulties in making payments soon after consummation of the loan (
i.e.,
within the first 2 years), even if these delinquencies do not lead to consumers potentially losing their homes (
i.e.,
60 or more days past due, as opposed to 90 or more days or in foreclosure), as early difficulties in making payments indicates higher likelihood that the consumer may have lacked ability to repay at consummation. As in the Assessment Report, the Bureau assumes that the average early delinquency rate across a wide pool of mortgages—whether safe harbor QM, rebuttable presumption QM, or non-QM—is probative of whether such loans are reasonably within consumers' repayment ability, and that the dependence of these early delinquency rates on the defining characteristics of such loans is probative of how those characteristics may influence repayment ability. The Bureau acknowledges that alternative measures of delinquency, including those used in an

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2020-13739. Public record. Not legal advice.