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WTF is happening with QM?
On 4/8/2021, Fannie Mae and Freddie Mac, the two biggest players in the US mortgage market, who buy most of the mortgages originated announced that all mortgage applications with a date of 6/30/2021 or beyond must conform to the revised qualified mortgage (QM) rules. They will no longer accept loans under the current QM patch rules.
This flies in the face of recent CFPB proposals to delay implementation of the revised QM rules until 10/1/2022.
What is QM?
In the aftermath of the global financial crisis, many new regulations were implemented designed to ensure that mortgage lenders made a reasonable good faith assessment at or before the closing of a loan that the borrower would have sufficient income to pay it back over time. Mortgages that complied were called qualified mortgages (QM).
What is the QM Patch?
The CFPB changed the debt to income rule if it can be bought by Fannie Mae, and Freddie Mac. This allowed mortgage with a higher than 43% debt to income ratio to be considered qualified mortgages if eligible for purchase by Fannie or Freddie.
The QM Patch has helped Fannie and Freddie grow much bigger over the last decade or so.
What’s going on now?
