Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules 12839 

estimated production (585,000,000 

kernelweight pounds), which equals the 

assessment revenue of $14,625,000. The 

grower revenue is calculated by 

multiplying the grower price of $1,970 

per ton ($0.99 per kernelweight pound) 

times the estimated production 

(585,000,000 kernelweight pounds), 

which equals the grower revenue of 

$579,150,000. In the final step, dividing 

the assessment revenue by the grower 

revenue, indicates that, for the 2020–21 

marketing year, the estimated 

assessment revenue as a percentage of 

total grower revenue would be about 2.5 

percent. 

This proposed rule would decrease 

the assessment obligation imposed on 

handlers. Assessments are applied 

uniformly on all handlers, and some of 

the costs may be passed on to growers. 

However, decreasing the assessment rate 

reduces the burden on handlers and 

may also reduce the burden on growers. 

The Board’s meeting was widely 

publicized throughout the California 

walnut industry. All interested persons 

were invited to attend the meeting and 

participate in Board deliberations on all 

issues. Like all Board meetings, the 

September 11, 2020, meeting was a 

public meeting and all entities, both 

large and small, were able to express 

views on this issue. Interested persons 

are invited to submit comments on this 

proposed rule, including the regulatory 

and information collection impacts of 

this action on small businesses. 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

Chapter 35), the Order’s information 

collection requirements have been 

previously approved by the OMB and 

assigned OMB No. 0581–0178 Vegetable 

and Specialty Crops. No changes in 

those requirements would be necessary 

as a result of this proposed rule. Should 

any changes become necessary, they 

would be submitted to OMB for 

approval. 

This proposed rule would not impose 

any additional reporting or 

recordkeeping requirements on either 

small or large California walnut 

handlers. As with all Federal marketing 

order programs, reports and forms are 

periodically reviewed to reduce 

information requirements and 

duplication by industry and public 

sector agencies. 

AMS is committed to complying with 

the E-Government Act, to promote the 

use of the internet and other 

information technologies to provide 

increased opportunities for citizen 

access to Government information and 

services, and for other purposes. 

USDA has not identified any relevant 

Federal rules that duplicate, overlap, or 

conflict with this proposed rule. 

A small business guide on complying 

with fruit, vegetable, and specialty crop 

marketing agreements and orders may 

be viewed at: https://

www.ams.usda.gov/rules-regulations/ 

moa/small-businesses. Any questions 

about the compliance guide should be 

sent to Richard Lower at the previously 

mentioned address in the FOR FURTHER

INFORMATION CONTACT section. 

A 30-day comment period is provided 

to allow interested persons to respond 

to this proposed rule. 

List of Subjects in 7 CFR Part 984 

Marketing agreements, Reporting and 

recordkeeping requirements, and 

Walnuts. 

For the reasons set forth in the 

preamble, 7 CFR part 984 is proposed to 

be amended as follows: 

PART 984—WALNUTS GROWN IN 

CALIFORNIA 

■ 1. The authority citation for 7 CFR 

part 984 continues to read as follows: 

Authority: 7 U.S.C. 601–674. 

■ 2. Section 984.347 is revised to read 

as follows: 

§ 984.347 Assessment rate. 

On and after September 1, 2020, an 

assessment rate of $0.0250 per 

kernelweight pound is established for 

California merchantable walnuts. 

Bruce Summers, 

Administrator, Agricultural Marketing 

Service. 

[FR Doc. 2021–04569 Filed 3–4–21; 8:45 am] 

BILLING CODE P 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Part 1026 

[Docket No. CFPB–2021–0003] 

RIN 3170–AA98 

Qualified Mortgage Definition Under 

the Truth in Lending Act (Regulation 

Z): General QM Loan Definition; Delay 

of Mandatory Compliance Date 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Proposed rule; request for 

comment. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) is 

proposing to delay the mandatory 

compliance date of the final rule titled 

Qualified Mortgage Definition under the 

Truth in Lending Act (Regulation Z): 

General QM Loan Definition (General 

QM Final Rule) until October 1, 2022. 

DATES: Comments must be received on 

or before April 5, 2021. 

ADDRESSES: You may submit comments, 

identified by Docket No. CFPB–2021– 

0003 or RIN 3170–AA98, by any of the 

following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email: 2021-NPRMQMComplianceDateDelay@cfpb.gov. 

Include Docket No. CFPB–2021–0003 or 

RIN 3170–AA98 in the subject line of 

the message. 

• Mail/Hand Delivery/Courier: 

Comment Intake—QM Compliance Date 

Delay, Bureau of Consumer Financial 

Protection, 1700 G Street NW, 

Washington, DC 20552. 

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. You can 

make an appointment to inspect the 

documents by telephoning 202–435– 

7275. 

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: Ben 

Cady, Mark Morelli, Amanda Quester, 

or Priscilla Walton-Fein, 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. 


jbell on DSKJLSW7X2PROD with PROPOSALS
12840 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules 

1 85 FR 86308 (Dec. 29, 2020). 2 85 FR 67938 (Oct. 26, 2020). 

3 Dodd-Frank Wall Street Reform and Consumer 

Protection Act, Public Law 111–203, 124 Stat. 1376 

(2010). 

4 15 U.S.C. 1601 et seq. 

5 Dodd-Frank Act sections 1411–12, 1414, 124 

Stat. 1376, 2142–49; 15 U.S.C. 1639c. 

6 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). 

7 15 U.S.C. 1639c(a)(3). 

8 15 U.S.C. 1639c(b)(1). 

SUPPLEMENTARY INFORMATION: 

I. Summary of the Proposed Rule 

The Ability-to-Repay/Qualified 

Mortgage Rule (ATR/QM 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 ATR/QM Rule’s requirements 

for qualified mortgages (QMs) obtain 

certain protections from liability. The 

ATR/QM Rule defines several categories 

of QMs. 

One QM category defined in the ATR/ 

QM Rule is the General QM category. 

General QMs must comply with the 

ATR/QM Rule’s prohibitions on certain 

loan features, its points-and-fees limits, 

and its underwriting requirements. 

Under the original ATR/QM Rule, the 

ratio of the consumer’s total monthly 

debt to total monthly income (DTI or 

DTI ratio) could not exceed 43 percent 

for a loan to meet the General QM loan 

definition. In December 2020, the 

Bureau issued the General QM Final 

Rule, which amended Regulation Z by 

replacing the General QM loan 

definition’s DTI limit with a limit based 

on loan pricing and making other 

changes to the General QM loan 

definition.1 The General QM Final Rule 

took effect on March 1, 2021, and it 

provides a mandatory compliance date 

of July 1, 2021. For covered transactions 

for which creditors receive an 

application on or after the March 1, 

2021 effective date and before the July 

1, 2021 mandatory compliance date, 

creditors have the option of complying 

with either the revised General QM loan 

definition or the General QM loan 

definition in effect prior to March 1, 

2021. Only the revised General QM loan 

definition is available for applications 

received on or after July 1, 2021. 

The Bureau is proposing to delay the 

mandatory compliance date of the 

General QM Final Rule until October 1, 

2022. Specifically, the proposal would 

amend comments 43–2 and 43(e)(4)–2 

and –3 to reflect an extension of the 

mandatory compliance date of the 

General QM Final Rule by changing the 

date ‘‘July 1, 2021’’ where it appears in 

those comments to ‘‘October 1, 2022.’’ 

The proposal would also add new 

comment 43(e)(2)–1 to clarify the 

General QM loan definitions available to 

creditors for applications received on or 

after March 1, 2021 but prior to October 

1, 2022. 

If this proposal is finalized, for 

covered transactions for which creditors 

receive an application on or after March 

1, 2021 and before October 1, 2022, 

creditors would have the option of 

complying with either the revised 

General QM loan definition or the 

General QM loan definition in effect 

prior to March 1, 2021. Under the 

proposal, the revised regulations would 

apply to covered transactions for which 

creditors receive an application on or 

after October 1, 2022. 

The ATR/QM Rule also defines a 

second, temporary category of QMs for 

mortgages that (1) comply with the same 

loan-feature prohibitions and pointsand-fees limits as General QMs and (2) 

are eligible to be purchased or 

guaranteed by either the Federal 

National Mortgage Association (Fannie 

Mae) or the Federal Home Loan 

Mortgage Corporation (Freddie Mac) 

(collectively, the government-sponsored 

enterprises or GSEs), while operating 

under the conservatorship or 

receivership of the Federal Housing 

Finance Agency (FHFA). This proposed 

rule refers to these loans as Temporary 

GSE QM loans, and the provision that 

created this loan category is commonly 

known as the GSE Patch. In October 

2020, the Bureau issued a final rule 

stating that the Temporary GSE QM loan 

definition will be available only for 

covered transactions for which the 

creditor receives the consumer’s 

application before the mandatory 

compliance date of the General QM 

Final Rule.2 Therefore, under the 

proposal, the Temporary GSE QM loan 

definition would expire upon the earlier 

of October 1, 2022 or the date the 

applicable GSE exits Federal 

conservatorship (rather than on the 

current mandatory compliance date of 

July 1, 2021 or the date the applicable 

GSE exits Federal conservatorship). 

As discussed below, the Bureau is 

proposing to delay the mandatory 

compliance date of the General QM 

Final Rule to help ensure access to 

responsible, affordable mortgage credit 

and to preserve flexibility for 

consumers, particularly those affected 

by the COVID–19 pandemic. This 

proposal would not make other changes 

to the General QM loan definition. The 

Bureau plans to evaluate the General 

QM Final Rule’s amendments to the 

General QM loan definition and will 

consider at a later date whether to 

initiate another rulemaking to 

reconsider other aspects of the General 

QM Final Rule. 

The Bureau proposes that a final rule 

based on this proposal be effective 60 

days after publication in the Federal 

Register. The Bureau anticipates that 

this would make the final rule effective 

before the current July 1, 2021 

mandatory compliance date. 

II. Background 

A. Dodd-Frank Act Amendments to the 

Truth in Lending Act and the January 

2013 Final Rule 

The Dodd-Frank Wall Street Reform 

and Consumer Protection Act (DoddFrank Act) 3 amended the Truth in 

Lending Act (TILA) 4 to establish, 

among other things, ability-to-repay 

(ATR) requirements in connection with 

the origination of most residential 

mortgage loans.5 As amended by the 

Dodd-Frank Act, 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.6 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 nonmortgage 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.7

A creditor may not be certain whether 

its ATR determination is reasonable in 

a particular case. TILA addresses this 

potential uncertainty by defining a 

category of loans—called QMs—for 

which a creditor ‘‘may presume that the 

loan has met’’ the ATR requirements.8

The statute generally defines a QM to 

mean any residential mortgage loan for 

which: 

• The loan does not have negative 

amortization, interest-only payments, or 

balloon payments; 

• The loan term does not exceed 30 

years; 


jbell on DSKJLSW7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules 12841 

9 15 U.S.C. 1639c(b)(2)(A). 

10 78 FR 6408 (Jan. 30, 2013). 11As discussed in part II.C below, the Bureau 

made several amendments to the ATR/QM Rule in 

2020. Prior to 2020, the Bureau made several other 

amendments to the ATR/QM Rule. 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); 85 FR 67938 (Oct. 26, 2020). 12 12 CFR 1026.43(c), (e). The ATR/QM Rule 

created several additional categories of QMs. 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) 

through (E), as was in effect on February 26, 2021. 

This temporary category of QMs 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 QMs 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 Apr. 1, 2016). 

13 12 CFR 1026.43(e)(2)(i) through (iii). 

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

15 12 CFR 1026.43(e)(2)(v), as was in effect on 

February 26, 2021. 

16 12 CFR 1026.43(e)(2)(vi), as was in effect on 

February 26, 2021. 

17 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). 

18 12 CFR 1026.43(e)(2)(i) through (iii). 

19 12 CFR 1026.43(e)(4), as was in effect on 

February 26, 2021. 

20 12 CFR 1026.43(e)(4)(ii)(A) and 

1026.43(e)(4)(iii)(B), as was in effect on February 

26, 2021. 

21 85 FR 67938 (Oct. 26, 2020). 

22 12 U.S.C. 5512(d). 

23See generally Bureau of Consumer Fin. Prot., 

Ability to Repay and Qualified Mortgage 

Assessment Report (Jan. 2019), https://

files.consumerfinance.gov/f/documents/cfpb_

ability-to-repay-qualified-mortgage_assessmentreport.pdf (Assessment Report). 

24See, e.g., 82 FR 25246 (June 1, 2017) (request 

for information in connection with the Bureau’s 

assessment of the ATR/QM Rule); 83 FR 10437 

(Mar. 9, 2018) (request for information on the 

Bureau’s rulemaking process); 83 FR 12286 (Mar. 

21, 2018) (request for information on the Bureau’s 

adopted regulations and new rulemaking 

authorities); 83 FR 10437 (Mar. 9, 2018) (request for 

information on the Bureau’s inherited regulations 

and inherited rulemaking authorities). In response 

to these requests for information, the Bureau 

received comments on the ATR/QM Rule from a 

wide variety of stakeholders. 

25 84 FR 37155, 37160–62 (July 31, 2019). 

26 85 FR 67938 (Oct. 26, 2020). 

• 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.9

In January 2013, the Bureau issued a 

final rule amending Regulation Z to 

implement TILA’s ATR requirements 

(January 2013 Final Rule).10 The 

January 2013 Final Rule became 

effective on January 10, 2014. This 

proposal refers to the January 2013 Final 

Rule and later amendments 11 to it 

collectively as the ATR/QM Rule or the 

Rule. The ATR/QM Rule implements 

the statutory ATR provisions discussed 

above and defines several categories of 

QMs, two of which are discussed 

below.12

One category of QMs defined by the 

ATR/QM Rule consists of General QMs. 

The January 2013 Final Rule provided 

that a loan was a General QM if: 

• The loan does not have negativeamortization, interest-only, or balloonpayment features, a term that exceeds 30 

years, or points and fees that exceed 

specified limits; 13

• The creditor underwrites the loan 

based on a fully amortizing schedule 

using the maximum rate permitted 

during the first five years; 14

• The creditor considers and verifies 

the consumer’s income and debt 

obligations in accordance with 

appendix Q; 15 and 

• The consumer’s DTI ratio is no 

more than 43 percent, determined in 

accordance with appendix Q.16

Appendix Q contained standards for 

calculating and verifying debt and 

income for purposes of determining 

whether a mortgage satisfies the 43 

percent DTI limit for General QMs. The 

standards in appendix Q were adapted 

from guidelines maintained by Federal 

Housing Administration (FHA) when 

the January 2013 Final Rule was 

issued.17

A second category of QMs defined by 

the January 2013 Final Rule, Temporary 

GSE QMs, consisted of mortgages that 

(1) comply with the ATR/QM Rule’s 

prohibitions on certain loan features 

and its limitations on points and fees 18

and (2) are eligible to be purchased or 

guaranteed by either GSE while under 

the conservatorship of the FHFA.19

Unlike for General QMs, the January 

2013 Final Rule did not prescribe a DTI 

limit for Temporary GSE QMs nor did 

it require use of appendix Q to verify 

and calculate debt, income, and DTI 

ratios. The January 2013 Final Rule 

provided that the Temporary GSE QM 

loan definition would expire with 

respect to each GSE when that GSE 

ceases to operate under conservatorship 

or on January 10, 2021, whichever 

occurred first.20 As discussed further 

below in part II.C.1, the Bureau issued 

a final rule in October 2020 extending 

the expiration of the Temporary GSE 

QM loan definition.21

B. The Bureau’s Assessment of the ATR/ 

QM Rule, Requests for Information, and 

the ANPR 

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.22 In January 2019, the 

Bureau published its ATR/QM Rule 

Assessment Report.23 During the period 

leading up to and following the issuance 

of the Assessment Report, the Bureau 

solicited and received substantial public 

and stakeholder input on issues related 

to the ATR/QM Rule.24

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. 

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.25

C. The Bureau’s 2020 QM Final Rules 

In 2020, the Bureau issued three final 

rules related to the ATR/QM Rule: The 

Patch Extension Final Rule, the General 

QM Final Rule, and the Seasoned QM 

Final Rule. These final rules are 

discussed below. 

1. The Patch Extension Final Rule 

The Bureau issued the Patch 

Extension Final Rule on October 20, 

2020. It was published in the Federal 

Register on October 26, 2020.26 The 

Patch Extension Final Rule amended 

Regulation Z to replace the January 10, 

2021 sunset date of the Temporary GSE 

QM loan definition with a provision 

stating that the Temporary GSE QM loan 

definition will be available only for 

covered transactions for which the 

creditor receives the consumer’s 

application before the mandatory 

compliance date of final amendments to 

the General QM loan definition in 

Regulation Z. The Patch Extension Final 

Rule did not amend the clause 


jbell on DSKJLSW7X2PROD with PROPOSALS
12842 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules 

27 85 FR 86308 (Dec. 29, 2020). 

28See comment 43(e)(2)(v)(B)–3.i. 

29 85 FR 86402 (Dec. 29, 2020). 

30 Id. 

31Bureau of Consumer Fin. Prot., Statement on 

Mandatory Compliance Date of General QM Final 

Rule and Possible Reconsideration of General QM 

Final Rule and Seasoned QM Final Rule (Feb. 23, 

2021), https://www.consumerfinance.gov/ 

documents/9505/cfpb_qm-statement_2021-02.pdf. 

32 86 FR 11623 (Feb. 26, 2021). 

33News Release, Bureau of Labor Statistics, U.S. 

Dep’t of Labor, USDL–21–0158, The Employment 

Situation (Feb. 5, 2021), https://www.bls.gov/charts/ 

employment-situation/civilian-unemploymentrate.htm, and https://www.bls.gov/charts/ 

employment-situation/civilian-labor-forceparticipation-rate.htm (charts related to the Feb. 5, 

2021 The Employment Situation news release). 

34The Coronavirus Aid, Relief, and Economic 

Security Act, CARES Act: Hearing on The Quarterly 

CARES Act Report to Congress Before the S. Comm. 

on Banking, Hous., & Urban Affairs, 116th Cong. 2– 

3 (2020) (statement of Jerome H. Powell, Chairman, 

Bd. of Governors of the Fed. Reserve Sys.), https:// 

www.banking.senate.gov/imo/media/doc/ 

Powell%20Testimony%205-19-20.pdf (CARES Act 

Hearing). 

providing that the Temporary GSE QM 

loan definition expires on the date the 

applicable GSE exits Federal 

conservatorship. Therefore, under the 

Patch Extension Final Rule, the 

Temporary GSE QM loan definition will 

expire upon the earlier of the mandatory 

compliance date of the final 

amendments to the General QM loan 

definition or the date the applicable 

GSE exits Federal conservatorship. 

2. The General QM Final Rule 

The Bureau issued the General QM 

Final Rule on December 10, 2020. It was 

published in the Federal Register on 

December 29, 2020.27 The General QM 

Final Rule amended Regulation Z to 

remove the General QM loan 

definition’s DTI limit (and appendix Q) 

and replace it with a limit based on the 

loan’s pricing. Under the General QM 

Final Rule, a loan meets the General QM 

loan definition only if the annual 

percentage rate (APR) exceeds the 

average prime offer rate (APOR) for a 

comparable transaction by less than 2.25 

percentage points as of the date the 

interest rate is set. The final rule 

provided higher thresholds for loans 

with smaller loan amounts, for certain 

manufactured housing loans, and for 

subordinate-lien transactions. The final 

rule also requires that the creditor 

consider the consumer’s DTI ratio or 

residual income, income or assets other 

than the value of the dwelling 

(including any real property attached to 

the dwelling) securing the loan, and 

debts and verify the consumer’s income 

or assets other than the value of the 

property securing the transaction and 

debts. The final rule also provides a safe 

harbor for compliance with the 

verification requirement if a creditor 

complies with verification standards in 

certain manuals listed in the rule.28

The General QM Final Rule had an 

effective date of March 1, 2021 but 

provided a mandatory compliance date 

of July 1, 2021. Therefore, for covered 

transactions for which creditors receive 

an application on or after March 1, 2021 

and before July 1, 2021, creditors have 

the option of complying with either the 

revised General QM loan definition or 

the General QM loan definition in effect 

prior to March 1, 2021. Under the Patch 

Extension Final Rule, described above, 

the Temporary GSE QM loan definition 

will expire on the mandatory 

compliance date of the General QM 

amendments. Therefore, for covered 

transactions for which creditors receive 

an application before July 1, 2021, 

creditors may also originate Temporary 

GSE QM loans. 

3. The Seasoned QM Final Rule 

The Bureau issued the Seasoned QM 

Final Rule on December 10, 2020. It was 

published in the Federal Register on 

December 29, 2020.29 The Seasoned QM 

Final Rule created a new category of 

QMs for first-lien, fixed-rate covered 

transactions that have met certain 

performance requirements over a 

seasoning period of at least 36 months, 

are held in portfolio by the originating 

creditor or first purchaser until the end 

of the seasoning period, comply with 

general restrictions on product features 

and points and fees, and meet certain 

underwriting requirements.30 The 

Seasoned QM Final Rule took effect on 

March 1, 2021. Under the Seasoned QM 

Final Rule, the revised regulations apply 

to covered transactions for which 

creditors receive an application on or 

after this effective date. Thus, due to the 

seasoning period, no loan will be 

eligible to become a Seasoned QM until 

at least 36 months after March 1, 2021. 

4. February 2021 Statement Regarding 

General QM and Seasoned QM Final 

Rules 

On February 23, 2021, the Bureau 

issued a Statement on Mandatory 

Compliance Date of General QM Final 

Rule and Possible Reconsideration of 

General QM Final Rule and Seasoned 

QM Final Rule (Statement).31 The 

Statement was published in the Federal 

Register on February 26, 2021.32 The 

Statement indicated that the Bureau is 

considering whether to initiate a 

rulemaking to revisit the Seasoned QM 

Final Rule. It also noted that if the 

Bureau decides to do so, it expects that 

it will consider in that rulemaking 

whether any potential final rule 

revoking or amending the Seasoned QM 

Final Rule should affect covered 

transactions for which an application 

was received during the period from 

March 1, 2021, until the effective date 

of such a final rule. The Statement also 

indicated that the Bureau expected to 

issue shortly a proposed rule that would 

delay the July 1, 2021 mandatory 

compliance date of the General QM 

Final Rule and that the Bureau will 

consider at a later date whether to 

initiate another rulemaking to 

reconsider other aspects of the General 

QM Final Rule. 

D. The Effects of the COVID–19 

Pandemic on the Mortgage Markets 

The General QM Final Rule 

acknowledged that the COVID–19 

pandemic has had a significant effect on 

the U.S. economy. In the early months 

of the pandemic, economic activity 

contracted, millions of workers became 

unemployed, and mortgage markets 

were affected. Although the 

unemployment rate has declined from a 

high of 14.8 percent in April 2020 to 6.3 

percent in January 2021,33

unemployment remains elevated 

relative to the pre-pandemic rate of 3.5 

percent in February 2020, and the labor 

force participation rate remains below 

pre-pandemic levels, at 61.4 percent in 

January 2021 versus 63.3 percent in 

February 2020. The housing market has 

seen a significant rebound in mortgageorigination activity, buoyed by 

historically low interest rates and by an 

increasingly large share of government 

and GSE-backed loans. However, the 

share of origination activity outside the 

government and GSE-backed origination 

channels has declined from prepandemic levels, and mortgage-credit 

availability for many consumers— 

including those who would be 

dependent on the non-QM market for 

financing—remains tight. The 

pandemic’s impact on both the 

secondary market for new originations 

and on the servicing of existing 

mortgages is described below. 

1. Secondary Market Impacts and 

Implications for Mortgage Origination 

Markets 

The early economic disruptions 

associated with the COVID–19 

pandemic restricted the flow of credit in 

the U.S. economy, particularly as 

uncertainty rose in mid-March 2020, 

and investors moved rapidly towards 

cash and government securities.34 The 

lack of investor demand to purchase 

mortgages, combined with a large 

supply of agency mortgage-backed 


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35Agency MBS are backed by loans guaranteed by 

Fannie Mae, Freddie Mac, and the Government 

National Mortgage Association (Ginnie Mae). 

36Laurie Goodman et al., Urban Inst., Housing 

Finance at a Glance, Monthly Chartbook (Mar. 26, 

2020), https://www.urban.org/sites/default/files/ 

publication/101926/housing-finance-at-a-glance-amonthly-chartbook-march-2020.pdf (Housing 

Finance at a Glance) (on file). 

37Press 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. 

38CARES Act Hearing, supra note 34, at 3. 

39Non-agency MBS are not backed by loans 

guaranteed by Fannie Mae, Freddie Mac, or Ginnie 

Mae. This includes securities collateralized by nonQM loans. 40Brandon Ivey, Non-Agency MBS Issuance 

Slowed in First Quarter, Inside Mortg. Fin. (Apr. 3, 

2020), https://www.insidemortgagefinance.com/

articles/217623-non-agency-mbs-issuance-slowedin-first-quarter (on file). 41Bandon Ivey, Non-QM MBS Issuers Ready. But 

Where Are the Loans?, Inside Mortg. Fin. (Jan. 29, 

2021), https://www.insidemortgagefinance.com/ 

articles/220373-non-qm-originations-and-mbsready-to-rebound-after-the-refi-boom (on file). 42Brandon Ivey, Expanded-Credit Lending Inches 

Up in Third Quarter, Inside Mortg. Fin. (Nov. 25, 

2020), https://www.insidemortgagefinance.com/ 

articles/219861-expanded-credit-lending-ticks-upin-3q-amid-slow-recovery (on file). 

43Refers to the non-QM market as defined by the 

January 2013 Final Rule. With the effective date of 

the price-based approach in the revised General QM 

loan definition, many of these loans historically 

considered non-QM may qualify for QM status after 

March 1, 2021. 

44Brandon Ivey, Outlook on Non-Agency MBS 

Issuance: Bright and Gloomy, Inside Mortg. Fin. 

(Jan. 15, 2021), https://

www.insidemortgagefinance.com/articles/220261- 

mixed-views-on-the-outlook-for-non-agency-mbsissuance-in-2021 (on file). 

45Laurie Goodman et al., Urban Inst., Housing 

Finance at a Glance, Monthly Chartbook (Jan, 

2021), https://www.urban.org/sites/default/files/ 

publication/103539/housing-finance-at-a-glance-amonthly-chartbook-january-2021_1.pdf (Housing 

Finance at a Glance) (on file). 

securities (MBS) entering the market,35

resulted in widening spreads between 

the rates on a 10-year Treasury note and 

mortgage interest rates.36 This dynamic 

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. After 

the actions taken by the Board of 

Governors of the Federal Reserve 

System (Board) in March 2020 to 

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,’’ 37 market 

conditions improved substantially.38

This helped to stabilize the MBS market 

and resulted in a decline in mortgage 

rates and a significant increase in 

refinance activity since the Board’s 

intervention. 

Because non-agency MBS 39 are 

generally perceived by investors as 

riskier than agency MBS, the market for 

non-agency and non-QM mortgage 

credit significantly contracted in the 

early months of the pandemic. 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.40 Nearly all 

major non-QM creditors ceased making 

loans in March and April 2020. The 

non-QM market has since been 

recovering, with strong investor demand 

for non-QM MBS due to better-thanexpected performance during the 

pandemic.41 Many non-QM creditors— 

which largely depend on the ability to 

sell loans in the secondary market in 

order to fund new loans—have resumed 

originations, although some continue to 

maintain tighter underwriting 

requirements compared to prior to the 

pandemic.42 Other creditors that have 

typically specialized in non-QM 

financing have shifted their focus to 

GSE originations due to historically low 

interest rates and the relative speed and 

ease with which GSE loans can be 

originated. Nonetheless, many non-QM 

creditors and investors expect the nonQM market 43 to continue to strengthen 

in 2021 and recover to its pre-pandemic 

levels of production.44

As illustrated in Figure 1, the GSEs 

continue to play a dominant role in the 

market recovery, with the GSE share of 

first-lien mortgage originations at 61.9 

percent in the third quarter of 2020, up 

from 45.3 percent in the third quarter of 

2019. One analysis found that the FHA 

and U.S. Department of Veterans Affairs 

(VA) share declined slightly to 17.4 

percent from 19.5 percent a year prior.45


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12844 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules 

46Public Law 116–136, 134 Stat. 281 (2020). 

47Press Release, The White House, Fact Sheet: 

Biden Administration Announces Extension of 

COVID–19 Forbearance and Foreclosure Protections 

for Homeowners (Feb. 16, 2021), https://

www.whitehouse.gov/briefing-room/statementsreleases/2021/02/16/fact-sheet-bidenadministration-announces-extension-of-covid-19- 

forbearance-and-foreclosure-protections-forhomeowners/. See also Press Release, Fed. Hous. 

Fin. Agency, FHFA Extends COVID–19 Forbearance 

Period and Foreclosure and REO Eviction 

Moratoriums (Feb. 25, 2021), https://www.fhfa.gov/ 

Media/PublicAffairs/Pages/FHFA-Extends-COVID19-Forbearance-Period-and-Foreclosure-and-REOEviction-Moratoriums.aspx. 

48The 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. Fed. Hous. Fin. Agency, FHFA 

Addresses Servicer Liquidity Concerns, Announces 

Four Month Advance Obligation Limit for Loans in 

Forbearance (Apr. 21, 2020), https://www.fhfa.gov/ 

Media/PublicAffairs/Pages/FHFA-AddressesServicer-Liquidity-Concerns-Announces-FourPortfolio lending declined to 19.6 

percent in the third quarter of 2020, 

down from 33.3 percent in the third 

quarter of 2019, and private label 

securitizations declined to 1 percent 

from 1.8 percent a year prior. 

2. Servicing Market Impacts and 

Implications for Origination Markets 

In addition to the direct impact on 

origination volume and composition, 

the pandemic’s impact on the mortgage 

servicing market has downstream effects 

on mortgage originations as many of the 

same entities both originate and service 

mortgages. 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 into 

law the Coronavirus Aid, Relief, and 

Economic Security Act (CARES Act) 46

in March 2020. The CARES Act 

provides certain protections for 

borrowers with federally backed 

mortgages, such as those whose 

mortgages are purchased or securitized 

by a GSE or insured or guaranteed by 

the FHA, VA, or U.S. Department of 

Agriculture (USDA). The CARES Act 

mandated a 60-day foreclosure 

moratorium for such mortgages and 

allowed 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. 

FHFA recently announced that 

borrowers with a mortgage backed by 

the GSEs may be eligible for two 

additional three-month forbearance 

extensions, for a total of up to 18 

months of forbearance, for certain 

borrowers who began a COVID–19 

forbearance on or before February 28, 

2021. On February 16, 2021, FHA, VA, 

and USDA also provided up to six 

months of additional mortgage 

forbearance, in three-month increments, 

for borrowers who entered forbearance 

on or before June 30, 2020. FHA, VA, 

and USDA also extended the foreclosure 

moratorium on government-insured and 

guaranteed loans until June 30, 2021, 

from the previous expiration date of 

March 31, 2021, and the GSEs 

announced a similar extension on 

February 25, 2021.47 The government 

agencies also announced an extension 

in the forbearance enrollment window 

until June 30, 2021, to provide 

additional time for borrowers to request 

a COVID–19 forbearance. FHFA has not 

yet announced a deadline for borrowers 

with mortgages backed by the GSEs to 

enroll in a COVID–19 forbearance plan. 

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.48


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Month-Advance-Obligation-Limit-for-Loans-inForbearance.aspx. 

49Press Release, Mortg. Bankers Ass’n, Share of 

Mortgage Loans in Forbearance Declines to 5.22% 

(Feb. 22, 2021), https://www.mba.org/2021-pressreleases/february/share-of-mortgage-loans-inforbearance-declines-to-522-percent. 

50Warehouse providers are creditors that provide 

financing to mortgage originators and servicers to 

fund and service loans. 

51Maria Volkova, FHA/VA Lenders Raise Credit 

Score Requirements, Inside Mortg. Fin. (Apr. 3, 

2020), https://www.insidemortgagefinance.com/ 

articles/217636-fhava-lenders-raise-fico-creditscore-requirements (on file). 

52Press Release, Fed. Hous. Fin. Agency, Adverse 

Market Refinance Fee Implementation now 

December 1 (Aug. 25, 2020), https://www.fhfa.gov/ 

Media/PublicAffairs/Pages/Adverse-MarketRefinance-Fee-Implementation-Now-December1.aspx. 

53On 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. 

Ginnie Mae, All Participant Memorandum (APM) 

20–03: Availability of Pass-Through Assistance 

Program for Participants in Ginnie Mae’s SingleFamily MBS Program (Apr. 10, 2020), https://

www.ginniemae.gov/issuers/program_guidelines/ 

Pages/mbsguideapmslibdisppage.aspx? 

ParamID=105. 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. 

Press Release, Ginnie Mae, Ginnie Mae approves 

private market servicerliquidity facility (Apr. 7, 

2020), https://www.ginniemae.gov/newsroom/

Pages/PressReleaseDispPage.aspx?ParamID=194. 

54Fin. Stability Oversight Council, U.S. Dep’t of 

the Treasury, 2020 Annual Report, at 169, https:// 

home.treasury.gov/system/files/261/FSOC2020

AnnualReport.pdf. 

Servicers also remain obligated to make 

escrowed real estate tax and insurance 

payments to local taxing authorities and 

insurance companies. While servicers 

are required to hold liquid reserves to 

cover anticipated advances, early in the 

pandemic there were significant 

concerns that higher-than-expected 

forbearance rates over an extended 

period of time could lead to liquidity 

shortages, particularly among many 

non-bank servicers. While forbearance 

rates remain elevated at 5.22 percent for 

the week ending February 14, 2021, they 

have decreased since reaching their high 

of 8.55 percent on June 7, 2020.49

However, the rate of decline has begun 

to slow, as illustrated in Figure 2 below. 

Because many mortgage servicers also 

originate the loans they service, many 

creditors, as well as several warehouse 

providers,50 initially responded to the 

risk of elevated forbearances and higherthan-expected monthly advances by 

imposing credit overlays—i.e., 

additional underwriting standards—for 

new originations. These new 

underwriting standards included more 

stringent requirements for non-QM, 

jumbo, and government loans.51 An 

‘‘adverse market fee’’ of 50 basis points 

on most refinances became effective for 

new originations delivered to the GSEs 

on or after December 1, 2020, to cover 

projected losses due to forbearances, the 

foreclosure moratoriums, and other 

default servicing expenses.52 However, 

due to refinance origination profits 

resulting from historically low interest 

rates, the leveling off in forbearance 

rates, and actions taken at the Federal 

level to alleviate servicer liquidity 

pressure,53 concerns over non-bank 

liquidity, and related credit overlays 

have eased, although Federal regulators 

continue to monitor the situation.54

Nonetheless, access to credit for higherrisk but creditworthy consumers 

remains an ongoing concern given 

continued uncertainty over the impact 

of the expiration of foreclosure 

moratoriums and COVID–19 forbearance 

plans on the mortgage market as well as 

lender capacity constraints due to strong 

refinance demand. 

III. 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, 


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12846 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules 

55 12 U.S.C. 5581(a)(1)(A). 56 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). 

57 15 U.S.C. 1604(a). 

58 15 U.S.C. 1601(a). 

59 15 U.S.C. 1639b(a)(2). 

60 15 U.S.C. 1639c(b)(2)(A). 

61 15 U.S.C. 1639c(b)(3)(B)(i). 

62 15 U.S.C. 1639c(b)(3)(A). 

63 12 U.S.C. 5512(b)(1). 

orders, and guidelines.’’ 55 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.56

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.57 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.’’ 58

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.59

The Bureau is proposing to issue this 

proposed rule pursuant to its 

rulemaking, adjustment, and exception 

authority under TILA section 105(a). 

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).60 The 

Bureau is proposing to issue this 

proposed rule pursuant to its authority 

under TILA section 129C(b)(2)(A)(vi). 

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.61 In addition, TILA 

section 129C(b)(3)(A) directs the Bureau 

to prescribe regulations to carry out the 

purposes of section 129C.62 The Bureau 

is proposing to issue this proposed rule 

pursuant to its authority under TILA 

section 129C(b)(3)(B)(i). 

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.63 TILA and title X of the DoddFrank 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. 

IV. Section-by-Section Analysis 

1026.43 Minimum Standards for 

Transactions Secured by a Dwelling 

The General QM Final Rule 

established a March 1, 2021 effective 

date and a July 1, 2021 mandatory 

compliance date. Comment 43–2 

explains that, for transactions for which 

a creditor received the consumer’s 

application on or after March 1, 2021, 

and prior to July 1, 2021, creditors 

seeking to originate General QMs have 

the option of complying with either the 

revised General QM loan definition or 

the version of the General QM loan 

definition that was in effect prior to 

March 1, 2021. This comment also 

explains that, for transactions for which 

a creditor received the consumer’s 

application on or after July 1, 2021, 

creditors seeking to originate General 

QMs must use the revised General QM 

loan definition. 

Additionally, under the Patch 

Extension Final Rule, the Temporary 

GSE QM loan definition expires on the 

mandatory compliance date of the 

General QM Final Rule or the date the 

applicable GSE ceases to operate under 

conservatorship, whichever comes first. 

Therefore, creditors seeking to originate 

QMs have the additional option of 

complying with the Temporary GSE QM 

loan definition, if the application for the 

covered transaction was received before 

either July 1, 2021 or the date the 

applicable GSE ceases to operate under 

conservatorship, whichever comes first. 

The Bureau is proposing to delay the 

mandatory compliance date of the 

General QM Final Rule until October 1, 

2022. Specifically, the proposal would 

amend comment 43–2 to extend the 

mandatory compliance date of the 

General QM Final Rule by changing July 

1, 2021, where it appears in that 

comment, to October 1, 2022. As 

discussed below in the section-bysection analysis of § 1026.43(e)(2), the 

Bureau is also proposing to add 

comment 43(e)(2)-1 to clarify that both 

the General QM loan definition that was 

in effect prior to the effective date of the 

General QM Final Rule and the General 

QM loan definition as amended by the 

General QM Final Rule are available to 

creditors for transactions for which a 

creditor received an application on or 

after March 1, 2021 but prior to October 

1, 2022. Finally, as discussed below in 

the section-by-section analysis of 

§ 1026.43(e)(4), the Bureau is proposing 

to change July 1, 2021, where it appears 

in the commentary to § 1026.43(e)(4), to 

October 1, 2022. 

This proposal would extend by 15 

months—from July 1, 2021 to October 1, 

2022—the period during which the 

revised General QM loan definition, the 

General QM loan definition that was in 

effect prior to March 1, 2021, and the 

Temporary GSE QM loan definition all 

would be available to creditors. 

Specifically, for transactions for which 

a creditor received the consumer’s 

application on or after March 1, 2021 

and prior to October 1, 2022, creditors 

seeking to originate General QMs would 

have the option of complying with 

either the revised General QM loan 

definition or the version of the General 

QM loan definition that was in effect 

prior to March 1, 2021. For transactions 

for which a creditor received the 

consumer’s application on or after 

October 1, 2022, creditors seeking to 

originate General QMs would have to 

use the revised General QM loan 

definition. Additionally—because the 

Temporary GSE QM loan definition 

expires on the mandatory compliance 

date of the General QM Final Rule or the 

date the applicable GSE ceases to 

operate under conservatorship— 

creditors seeking to originate QMs 

would have the additional option of 


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64The Bureau stated that, with respect to the 

price-based thresholds in revised 

§ 1026.43(e)(2)(vi), the Bureau understood that 

creditors currently calculate the APR and APOR for 

mortgage loans. The Bureau also stated that the 

revised consider requirements generally reflected 

existing market practices and that creditors 

currently used and were familiar with the 

verification standards that the General QM Final 

Rule adopted. The Bureau also concluded that the 

General QM Final Rule would be less complex to 

implement relative to other rules the Bureau has 

issued, such as the January 2013 Final Rule or 

TILA–RESPA Integrated Disclosure Rule. 85 FR 

86308, 86385–86 (Dec. 29, 2020). 

65 Id. at 86313–15. 

66 85 FR 41448 (July 10, 2020). The Patch 

Extension Proposal was the proposed rule that the 

Bureau issued in connection with the Patch 

Extension Final Rule. 

67 85 FR 41716 (July 10, 2020). The General QM 

Proposal was the proposed rule that the Bureau 

issued in connection with the General QM Final 

Rule. 

68 85 FR 67938, 67949 (Oct. 26, 2020). 

69 Id. at 67951. Several commenters on the 

General QM Proposal also requested that the Bureau 

adopt an overlap period. The Bureau declined to 

adopt an overlap period in the General QM Final 

Rule for the same reasons it declined to adopt an 

overlap period in the Patch Extension Final Rule. 

85 FR 86308, 86385 (Dec. 29, 2020). 

70 85 FR 67938, 67953 n.141 (Oct. 26, 2020). 

71 Id. at 67953. 

72 85 FR 86308, 86385 (Dec. 29, 2020). 

73 85 FR 67938, 67950 (Oct. 26, 2020). 

74 85 FR 86308, 86333 (Dec. 29, 2020). 

complying with the Temporary GSE QM 

loan definition, if the application for the 

covered transaction was received before 

either October 1, 2022 or the date the 

applicable GSE ceases to operate under 

conservatorship, whichever comes first. 

Reasons the General QM Final Rule 

Adopted the July 1, 2021 Mandatory 

Compliance Date 

The General QM Final Rule adopted 

a mandatory compliance date of July 1, 

2021 because the Bureau concluded that 

this date would give creditors and the 

secondary market sufficient time— 

approximately six months from the date 

the Bureau expected that final rule to be 

published in the Federal Register—to 

prepare to comply with the General QM 

Final Rule’s amendments to the ATR/ 

QM Rule.64 The General QM Final Rule 

noted that the COVID–19 pandemic had 

significantly disrupted the mortgage 

market.65 Nevertheless, the Bureau 

finalized a July 1, 2021 mandatory 

compliance date, taking into 

consideration market conditions at the 

time and concerns about the perceived 

negative effects of the Temporary GSE 

QM loan definition on the market. 

Some commenters on the Patch 

Extension Proposal 66 and the General 

QM Proposal 67 cited the pandemic in 

requesting that the Bureau take different 

approaches to extending the Temporary 

GSE QM loan definition and revising 

the General QM loan definition than the 

Bureau had proposed. Several 

commenters on the Patch Extension 

Proposal asked the Bureau to extend the 

Temporary GSE QM loan definition to 

expire several months after the date 

creditors would be required to transition 

from the old General QM loan definition 

to the new definition. Among the 

reasons cited for the request was that 

the pandemic was straining creditors’ 

resources and personnel, making it more 

difficult for creditors to adapt to the 

new definition. A few of these 

commenters stated that an overlap 

period, during which creditors could 

continue to make QMs under the 

Temporary GSE QM loan definition 

after the date creditors would be 

required to transition to the revised 

General QM loan definition, would 

reduce the potential that a revised 

General QM loan definition could 

disrupt the mortgage market and affect 

credit access due to unforeseen changes 

in the economy or the mortgage market 

due to the pandemic.68

The Bureau declined to adopt an 

overlap period in the Patch Extension 

Final Rule. The Bureau concluded that 

establishing an overlap period that 

extends past the date creditors are 

required to transition from the thencurrent General QM loan definition to 

the revised General QM loan definition 

would keep the Temporary GSE QM 

loan definition in place longer than 

necessary to facilitate a smooth and 

orderly transition to a revised General 

QM loan definition. The Bureau stated 

that it sought to maintain the Temporary 

GSE QM loan definition only as long as 

necessary to facilitate a smooth and 

orderly transition to a revised General 

QM loan definition, and no longer, 

because the Bureau concluded that the 

Temporary GSE QM loan definition has 

certain negative effects on the mortgage 

market, including stifling innovation 

and the development of competitive 

private-sector approaches to 

underwriting. The Bureau further 

concluded that, as long as the 

Temporary GSE QM loan definition 

continued to be in effect, the non-GSE 

private market was less likely to 

rebound and that the existence of the 

Temporary GSE QM loan definition may 

have been limiting the development of 

the non-GSE private market. For these 

reasons, the Bureau concluded that it 

was appropriate for the Temporary GSE 

QM loan definition to remain in place 

no longer than the date creditors are 

required to transition from the thencurrent General QM loan definition to 

the revised General QM loan 

definition.69 (The Bureau also cited 

these negative effects in declining to 

make the Temporary GSE QM loan 

definition permanent.) 70 With respect 

to commenters’ concerns related to the 

pandemic, the Bureau stated that 

conditions in the mortgage market did 

not justify extending the Temporary 

GSE QM loan definition past the date 

creditors would be required to transition 

from the then-current General QM loan 

definition to the revised definition, 

particularly in light of the 

aforementioned concerns the Bureau 

stated about the negative effects of the 

Temporary GSE QM loan definition on 

the mortgage market.71

In the General QM Final Rule, several 

industry commenters requested a longer 

implementation period than the sixmonth period the Bureau proposed. 

Some of these commenters stated that 

the implementation period should 

account for other simultaneous 

challenges for creditors, including 

responding to the COVID–19 pandemic 

and its economic effects. The Bureau 

concluded that a six-month 

implementation period would give 

creditors and secondary market 

participants enough time to prepare to 

comply with the final rule, even in light 

of these challenges. The Bureau stated 

that current market conditions did not 

require a longer implementation 

period.72

In addition, two commenters that 

submitted a joint comment letter on the 

Patch Extension Proposal stated that the 

Temporary GSE QM loan definition 

should remain in place until the Bureau 

assesses the impacts of the pandemic on 

mortgage markets, including the decline 

of the non-QM market and creditors’ 

increasing reliance on GSE and FHA 

loans.73 In their comments on the 

General QM Proposal, some consumer 

advocate commenters and an individual 

commenter requested that the Bureau 

pause the General QM rulemaking in 

light of the pandemic. The consumer 

advocate commenters cited the turmoil 

and economic fallout from the 

pandemic as a reason to pause the 

rulemaking.74

The Bureau declined to extend the 

Temporary GSE QM loan definition 

indefinitely while the Bureau further 

assessed the impact of the pandemic or 

to pause the General QM rulemaking in 

light of the pandemic. However, in the 

Patch Extension Final Rule, the Bureau 

noted that, if market conditions were to 

change or other circumstances were to 

arise before the Bureau issued the 

General QM Final Rule, the Bureau 

could extend the Temporary GSE QM 


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12848 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules 

75 85 FR 67938, 67953 (Oct. 26, 2020). 

loan definition for a longer period of 

time.75

Reasons for the Proposed Extension of 

the Mandatory Compliance Date 

The Bureau is issuing this proposal 

because it has preliminarily concluded 

that maintaining the July 1, 2021 

mandatory compliance date may leave 

some struggling homeowners with fewer 

options by reducing the flexibility of 

creditors to respond to the effects of the 

pandemic. In the Patch Extension Final 

Rule and the General QM Final Rule, 

the Bureau noted the disruptive effects 

of the pandemic on the mortgage market 

but nevertheless concluded that these 

effects did not justify delaying the 

requirement to comply with the revised 

General QM loan definition on July 1, 

2021. Upon further evaluation, the 

Bureau is concerned that it may not 

have given sufficient weight to the 

potential risk that mandating the 

transition to the price-based approach in 

the revised General QM loan definition 

on July 1, 2021 could restrict options for 

consumers struggling with the 

disruptive effects of the pandemic. The 

Bureau preliminarily concludes that 

maximizing flexibility to respond to the 

effects of the pandemic, by delaying the 

mandatory compliance date until 

October 1, 2022, outweighs concerns 

that an extension of the mandatory 

compliance date could stifle the 

development of private-sector 

approaches to underwriting or a 

rebound of the non-GSE private market 

in the near term. 

The Bureau also believes that the 

adverse impact of the pandemic on 

mortgage markets may persist longer 

than anticipated at the time of 

publication of the General QM Final 

Rule. In particular, as discussed in more 

detail below, with the extension of 

certain forbearance programs and 

foreclosure moratoriums, the Bureau 

believes that the potential for disruption 

in the mortgage market will persist well 

past July 2021. 

The Bureau notes that this rulemaking 

does not reconsider the merits of the 

price-based approach adopted in the 

General QM Final Rule. The revised 

General QM loan definition went into 

effect on March 1, 2021, and creditors 

have the option of using that definition 

to originate QMs. Rather, this proposal 

addresses the narrower question of 

whether it would be appropriate in light 

of the continuing disruptive effects of 

the pandemic to help facilitate greater 

creditor flexibility and expanded 

availability of responsible, affordable 

credit options for some struggling 

consumers by allowing creditors to 

continue making QMs under the DTIbased General QM loan definition and 

under the Temporary GSE QM loan 

definition until October 1, 2022. 

The Bureau is concerned that 

requiring creditors seeking to make QM 

loans to shift to the price-based General 

QM loan definition and limiting their 

ability to rely on the Temporary GSE 

QM loan definition and on the DTIbased General QM loan definition on 

July 1, 2021 could reduce access to 

credit, particularly for certain consumer 

segments. The Bureau has two separate 

concerns related to access to 

responsible, affordable mortgage credit, 

as detailed further below. First, the 

Bureau believes that ongoing regulatory 

interventions to assist consumers who 

may have suffered an income disruption 

related to the pandemic—such as 

COVID–19 forbearance plans and 

foreclosure moratoriums—and potential 

disruptions in the market when those 

interventions expire may warrant an 

extension of the mandatory compliance 

date. Second, the Bureau has concerns 

about mortgage credit availability for 

some creditworthy consumers who 

would qualify for a mortgage but for the 

disruptive market effects of the 

pandemic, and such concerns may 

warrant an extension of the mandatory 

compliance date. 

Impact of foreclosure moratoriums 

and the expiration of COVID–19 

forbearance plans. The Bureau is 

issuing this proposal because it is 

concerned that the impact of the 

eventual expiration of foreclosure 

moratoriums and COVID–19 forbearance 

plans described in part II.D above has 

the potential to lead to additional 

disruptions in the mortgage markets. In 

particular, the Bureau is concerned that 

such expirations may create the 

potential for heightened delinquencies 

and foreclosures for consumers who 

continue to suffer disruptions in their 

income due to the COVID–19 pandemic. 

The Bureau is concerned that, while 

many consumers currently in 

forbearance plans can be assisted 

through payment deferrals and loan 

modifications, there will be some 

consumers who will be unable to either 

resume their mortgage payment or 

sustain a modified loan payment and 

will be forced to either sell their homes 

or be placed into foreclosure after the 

expiration of the foreclosure 

moratoriums. The Bureau is concerned 

that it may not have given sufficient 

weight to these issues in mandating that 

creditors comply with the price-based 

approach on July 1, 2021. In addition, 

the Bureau believes that the extension of 

certain forbearance programs and 

foreclosure moratoriums may result in 

these effects continuing longer than the 

Bureau anticipated at the time of the 

General QM Final Rule. 

The Bureau preliminarily concludes 

that extending the mandatory 

compliance date of the General QM 

Final Rule to October 1, 2022 will 

provide additional flexibility to 

creditors originating QM loans. 

Specifically, creditors would be 

permitted to originate General QM loans 

under the price-based General QM loan 

definition that took effect on March 1, 

2021, and would also be allowed to 

originate General QM loans in 

accordance with the DTI-based General 

QM loan definition that was in effect 

prior to March 1, 2021, as well as 

Temporary GSE QM loans, for an 

additional 15 months. As discussed in 

further detail in this section, the Bureau 

is issuing this proposal because 

providing such flexibility may benefit 

struggling consumers who are forced to 

sell their property to avoid foreclosure 

by helping to ensure that potential 

purchasers continue to have access to 

mortgage credit. The following section 

(entitled Concerns regarding access to 

mortgage credit for consumers) 

describes the Bureau’s concerns that 

despite record origination volume, 

access to credit has remained relatively 

tight for consumers with weaker credit. 

Moreover, this proposal may also 

provide some consumers with 

additional opportunities to refinance 

into historically low interest rates. 

The Bureau is concerned that the 

potential impact of the COVID–19 

pandemic on the mortgage market may 

continue for longer than anticipated at 

the time the Bureau issued the General 

QM Final Rule, and so could warrant 

additional flexibility in the QM market 

to ensure creditors are able to 

accommodate struggling consumers. 

Specifically, as discussed in part II.D, 

the expiration dates for the foreclosure 

moratoriums and enrollment dates for 

the COVID–19 forbearance plans have 

been extended for loans guaranteed or 

insured by the GSEs, FHA, VA, and 

USDA since the publication of the Patch 

Extension Final Rule and the General 

QM Final Rule. Both the GSEs and the 

government agencies have also 

lengthened the permissible forbearance 

period from the 12 months mandated in 

the CARES Act to up to 18 months for 

certain loans. Under these revised 

timelines, most COVID–19 forbearance 

plans will expire no later than June 30, 

2022. 

The Bureau is concerned that the 

combined impact of the expiration of 

the foreclosure moratoriums and the 

expiration of the COVID–19 forbearance 


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Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules 12849 

76Black Knight, Inc., Deferred Payments During 

Forbearance Beginning To Erode Equity Positions 

(Feb. 3, 2021) https://www.blackknightinc.com/ 

blog-posts/deferred-payments-during-forbearancebeginning-to-erode-equity-positions/ (Deferred 

Payments). 77 Ginnie Mae, Global Markets Analysis Report 

(Jan. 2021), https://www.ginniemae.gov/data_and_

reports/reporting/Documents/global_market_

analysis_jan21.pdf. 

78 Deferred Payments, supra note 76. 

79Urban Inst., The Predicted Foreclosure Surge 

Likely Won’t Happen, Even among Financially 

Vulnerable Borrowers (Feb. 11, 2021), https://

www.urban.org/urban-wire/predicted-foreclosuresurge-likely-wont-happen-even-among-financiallyvulnerable-borrowers. 

80 Id. 

81Fed. Hous. Fin. Agency, Home Affordable 

Refinance Program (HARP), https://www.fhfa.gov/ 

PolicyProgramsReearch/Programs/Pages/ 

HARP.aspx (last visited Feb. 23, 2021). 

plans creates the potential for 

heightened delinquencies and 

foreclosures for consumers who 

continue to suffer disruptions in their 

income due to the COVID–19 pandemic. 

While many consumers currently in 

forbearance plans can be assisted 

through payment deferrals and loan 

modifications, there will be some 

consumers who will be unable to 

sustain a modified loan payment and 

will be forced to sell their homes to 

avoid foreclosure. While rising house 

prices have increased overall home 

equity, which will assist consumers 

who need to sell their homes upon the 

expiration of their forbearance plan, 

more vulnerable consumers are likely to 

have less equity in their homes than the 

general population. One analysis 

indicated that 10.4 percent of mortgage 

consumers in forbearance have less than 

10 percent equity in their homes to pay 

for closing costs, and this share 

increases to 15.3 percent after taking 

into account 12 months of deferred 

interest during the forbearance period.76

If consumers have deferred payments of 

taxes and insurance, their equity 

position will have eroded even further. 

Government loans, which tend to have 

higher loan-to-value ratios (LTVs) and 

serve a higher-risk population, have a 

median LTV at origination of 96.5 

percent as compared to 75 percent LTV 

for mortgage borrowers overall.77

Accordingly, nearly 20 percent of FHA 

and VA mortgages have less than 10 

percent equity, and the share increases 

to 26 percent when taking into account 

deferred interest.78 While some research 

suggests borrowers with government 

loans have an average 22 percent equity 

buffer given recent home price 

appreciation, certain borrower segments 

and States and localities may remain at 

risk of heightened foreclosure activity.79

While the foreclosures and distressed 

sales are expected to remain far below 

the levels experienced during the 2008 

financial crisis,80 the Bureau 

preliminarily concludes that extending 

the mandatory compliance date until 

October 1, 2022, may assist some 

consumers who need to sell their homes 

by providing creditors additional 

flexibility to continue originating new 

QM loans under the Temporary GSE 

QM loan definition and under the DTIbased General QM loan definition, as 

well as under the price-based approach 

in the revised General QM loan 

definition. Consumers who need to sell 

their homes may benefit from a broader 

QM definition that encourages more 

potential purchasers to enter the market 

and buy properties that might otherwise 

go into foreclosure. Extending the 

Temporary GSE QM loan definition may 

also provide additional flexibility for 

the GSEs to develop and modify 

potential pre-foreclosure sale 

products—such as short sale and deedin-lieu of foreclosure programs—to 

respond to a potential increase in 

distressed sales as necessary. 

Under the revised timelines, most 

COVID–19 forbearance plans will expire 

no later than June 30, 2022, at which 

point the availability of the Temporary 

GSE QM loan definition and the General 

QM loan definition that was in effect 

prior to March 1, 2021 could help 

alleviate adverse impacts on consumers 

struggling to keep their homes upon 

exiting their forbearance plan. 

Extending the mandatory compliance 

date to October 1, 2022, as the Bureau 

proposes, would make these additional 

QM definitions available for three 

months after the latest date on which 

most COVID–19 forbearance plans are 

set to expire. The Bureau preliminarily 

concludes that three months is a 

sufficient period of time for creditors to 

use the additional QM flexibility to 

assist consumers whose COVID–19 

forbearance plans expire on June 30, 

2022 and whose incomes may not have 

recovered enough to sustain their prepandemic mortgage payment or a 

modified mortgage payment. 

The Bureau is also concerned that 

allowing the Temporary GSE QM loan 

definition to expire on July 1, 2021 

would limit the ability of the GSEs to 

originate new loans and could restrict 

their flexibility to develop new 

refinance programs to address emerging 

consumer needs during a period of 

heightened market uncertainty. In the 

General QM Final Rule, the Bureau 

estimated that the price-based approach 

in the revised General QM loan 

definition would preserve access to 

credit relative to the status quo with the 

DTI-based General QM loan definition 

and the Temporary GSE QM loan 

definition. Nevertheless, some loans 

that would be QMs under the 

Temporary GSE QM loan definition or 

the DTI-based General QM loan 

definition would not be eligible under 

the revised, price-based General QM 

loan definition. Maintaining the 

availability of all three QM definitions 

until October 1, 2022 would maximize 

refinance options for consumers who 

have been struggling to make their 

mortgage payments or who under more 

ordinary circumstances likely have the 

ability to repay their loans but who may 

be underwater on their mortgage as a 

result of the unique circumstances of 

the pandemic. 

As discussed earlier and illustrated in 

Figure 1, the GSEs tend to play a 

dominant role during economic 

downturns and recoveries, and 

additional origination flexibilities may 

prove helpful in the current market 

recovery by allowing consumers 

additional opportunities to refinance 

into historically low interest rates. For 

example, during the 2008 financial 

crisis, FHFA established the Home 

Affordable Refinance Program (HARP) 

to help homeowners who were unable 

to refinance their loans due to a decline 

in their home value. Approximately 3.5 

million consumers benefited from 

HARP, and FHFA found that consumers 

who refinanced through HARP have had 

lower delinquency rates compared with 

consumers who were eligible for HARP 

but did not refinance through the 

program.81 When HARP expired in 

2018, FHFA replaced it with the HighLTV Refinance Programs. These 

programs allow performing high-LTV 

(≤97 percent) borrowers to access rateand-term refinances without providing 

full income documentation. These 

refinances may currently obtain QM 

status through the Temporary GSE QM 

loan definition. As discussed earlier, 

while the Bureau does not expect 

widespread home price declines akin to 

the 2008 financial crisis, some segments 

of consumers and localities could 

benefit from the existing high-LTV 

refinance programs. More generally, 

extending the Temporary GSE QM loan 

definition would also help ensure that 

the ATR/QM Rule does not impair 

FHFA and the GSEs from exercising the 

flexibility to tailor existing programs to 

meet future market changes specific to 

the COVID–19 pandemic and the 

regulatory interventions discussed 

earlier. The Bureau preliminarily 

concludes that it would be appropriate 

to provide such loans with the QM 

presumption of compliance with the 

ATR requirements under the Temporary 

GSE QM loan definition, given that such 


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12850 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules 

82On January 14, 2021, the U.S. Department of 

the Treasury and the FHFA amended the terms of 

the PSPAs for Fannie Mae and Freddie Mac. 

Section 5.14(c) was added to the agreement and 

limits the GSEs’ acquisition of certain loans on or 

after July 1, 2021, including loans that are not 

qualified mortgages as defined by 12 CFR 

1026.43(e)(2), (5), (6), (7) or (f) with certain 

exceptions. 

83 85 FR 67938, 67951 (Oct. 26, 2020). Several 

commenters on the General QM Proposal also 

requested that the Bureau adopt an overlap period. 

The Bureau declined to adopt an overlap period in 

the General QM Final Rule for the same reasons it 

declined to adopt an overlap period in the Patch 

Extension Final Rule. 85 FR 86308, 86385 (Dec. 29, 

2020). 

84 Inside Mortg. Fin., One for the Ages: Home 

Lenders Set New Production Record of $4T-Plus 

(Jan. 27, 2021) https://

www.insidemortgagefinance.com/articles/220379- 

one-for-the-ages-home-lenders-set-new-productionrecord-of-4t-plus (on file). 

85Housing Finance at a Glance, supra note 36. 

programs would be implemented while 

the GSEs are under the conservatorship 

of FHFA. 

The Bureau preliminarily concludes 

that extending the mandatory 

compliance date of the General QM 

Final Rule to October 1, 2022 will 

benefit consumers by providing 

additional access to responsible, 

affordable mortgage credit and 

flexibility for the GSEs to create and 

modify programs to address emerging 

consumer needs. However, the Bureau 

also recognizes that the anticipated 

effects of this proposal may be affected 

by policies, agreements, or legislation 

created by parties other than the Bureau. 

For example, the Preferred Stock 

Purchase Agreements (PSPAs) for 

Fannie Mae and Freddie Mac or 

restrictions of FHFA, as regulator and 

conservator of the GSEs, may restrict the 

GSEs from purchasing loans with 

certain attributes or characteristics.82 To 

the extent that other factors prevent the 

GSEs from using the additional 

flexibilities provided by the extension of 

the mandatory compliance date and the 

Temporary GSE QM loan definition, the 

impacts of this proposed rule may be 

smaller than they otherwise would be. 

Nonetheless, the Bureau is issuing this 

proposal because it is concerned that 

mandating that creditors comply with 

the revised General QM loan definition 

on July 1, 2021 could limit options for 

consumers struggling due to the 

disruptive effects of the pandemic, and 

because the Bureau is unable to predict 

how such agreements or restrictions 

might change in the future. Accordingly, 

the Bureau has preliminarily concluded 

that the benefits of continued access to 

credit for consumers during the 

pandemic warrant the additional 

flexibility provided to creditors through 

this proposed rule. 

As noted above, in the Patch 

Extension Final Rule and the General 

QM Final Rule, the Bureau declined to 

extend the Temporary GSE QM loan 

definition beyond the July 1, 2021 

mandatory compliance date of the 

amendments to the General QM loan 

definition. The Bureau raised concerns 

about potential harms from leaving the 

Temporary GSE QM loan definition in 

place longer than necessary, including 

stifling innovation and the development 

of competitive private-sector approaches 

to underwriting. The Bureau also stated 

that, as long as the Temporary GSE QM 

loan definition continued to be in effect, 

the non-GSE private market was less 

likely to rebound and that the existence 

of the Temporary GSE QM loan 

definition may have been limiting the 

development of the non-GSE private 

market. For these reasons, the Bureau 

concluded that it was appropriate for 

the Temporary GSE QM loan definition 

to remain in place no longer than the 

date creditors are required to transition 

from the then-current General QM loan 

definition to the revised General QM 

loan definition.83 The Bureau 

concluded that the mandatory 

compliance date, and the expiration of 

Temporary GSE QM loan definition 

should occur on July 1, 2021. However, 

the Bureau now preliminarily concludes 

that the need to provide maximum 

flexibility to address the effects of the 

pandemic outweighs any, likely minor, 

inhibiting effect that extension of the 

Temporary GSE QM loan definition 

could have on new access to credit 

resulting from new private sector 

underwriting approaches or a rebound 

of the non-GSE private market during 

the same period. Moreover, market 

participants looking to adopt innovative 

underwriting approaches or expand the 

non-GSE market would have the option 

to use the price-based General QM loan 

definition even if the mandatory 

compliance period were delayed until 

October 1, 2022. Accordingly, the 

Bureau preliminarily concludes that 

leaving the Temporary GSE QM loan 

definition in place until October 1, 2022 

may be appropriate. 

Concerns regarding access to 

mortgage credit for consumers. The 

Bureau is also proposing to extend the 

mandatory compliance date of the 

General QM Final Rule to avoid a 

reduction in credit access for certain 

consumers who have been unable to 

purchase or refinance due to the effects 

of the pandemic on the origination 

market. As described further below, the 

Bureau is concerned that despite the 

record origination volumes, access to 

low interest-rate refinances and 

purchase mortgages in these unique 

circumstances may be less widely 

available for consumers with weaker 

credit relative to consumers with 

stronger credit. The Bureau is concerned 

that requiring creditors to transition to 

the price-based General QM loan 

definition on July 1, 2021 and 

eliminating the Temporary GSE QM 

loan definition and the DTI-based 

General QM loan definition at that time 

could exacerbate these credit access 

concerns. 

As illustrated in Figure 3, first-lien 

mortgage originations exceeded $4 

trillion in 2020, surpassing the prior 

record of $3.725 trillion set in 2003,84

and originators have faced significant 

capacity and resource constraints given 

strong refinance demand. In addition, 

the Board has undertaken extraordinary 

interventions to purchase agency MBS 

in large quantities since March of 2020, 

which has exerted downward pressure 

on MBS yields and thus increased 

liquidity for creditors who rely on the 

ability to sell GSE and government loans 

in the secondary markets.85


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Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules 12851 

86Pricing margins refer to the difference between 

the rate a creditor charges and the price at which 

a creditor can sell the loan in the secondary market. 

In addition to risk-based pricing adjustments that 

are independent of any adjustments charged in the 

secondary market, a creditor may charge additional 

margin to compensate for the time and expense of 

underwriting. 

87 Id. 

88Nat’l Mortg. News, Opinion: The originations 

feast and credit famine (Oct. 4, 2020), https://

www.nationalmortgagenews.com/opinion/theoriginations-feast-and-credit-availability-famine (on 

file). 

89Moody’s Analytics Credit Forecast. 

The combination of mortgage 

origination capacity constraints and 

increased liquidity in the agency MBS 

market has led creditors to focus on GSE 

originations, which are quicker to close 

and are generally considered less risky 

than FHA-insured mortgages and loans 

originated in the private markets. In the 

short-run, these pandemic-related 

capacity constraints could cause the 

supply of mortgage credit to fall short of 

demand from otherwise creditworthy 

consumers who likely have the ability to 

repay. In response, creditors may 

impose credit overlays or, more 

commonly, increase pricing margins 86

for certain products that are timeconsuming to underwrite or for higherrisk consumers, including margin 

increases beyond the risk-based pricing 

adjustments typically charged in a 

market without creditor capacity 

constraints. Creditors may raise prices 

disproportionately for loans that either 

take longer to close or have a lower 

probability of closing to compensate for 

the fact that such loans reduce a 

creditor’s total expected origination 

volume within a given time period. 

Overall, these short-run responses to the 

pandemic-related capacity constraints 

could have the effect of temporarily 

pricing some creditworthy consumers 

out of the market or delaying their 

ability to obtain a mortgage they 

otherwise could repay. 

Figure 2 illustrates the strong growth 

of GSE lending in recent months, 

showing GSE volume in the third 

quarter of 2020 was at 61.9 percent, up 

from 45.3 percent a year prior. By 

contrast, portfolio lending declined 

significantly to 19.6 percent in the third 

quarter of 2020, compared to 33.3 

percent in the third quarter of 2019. 

Private label securitizations declined to 

1 percent from 1.8 percent a year prior, 

and even the FHA and VA share (whose 

MBS are beneficiaries of the Board’s 

agency MBS purchases) are down 

slightly to 17.4 percent from 19.5 

percent a year prior.87

Even within the GSE and government 

markets, some consumers may face 

reduced access to credit, as capacity 

constraints cause mortgage originators 

to focus on consumers with the 

strongest credit.88 Figure 4 illustrates 

potential differences in new credit 

originated for consumers with credit 

scores above and below a 700 credit 

score in 2020.89 Year-over-year, 

mortgage balances for consumers with a 

credit score of at least 700 have 

increased by 10 percent by the end of 

2020, while mortgage balances for 

consumers with a credit score below 

700 have decreased by nearly 2 percent. 

In contrast, the auto financing sector has 

a far smaller disparity that also 

remained more consistent throughout 

the year. 


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12852 Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Proposed Rules 

90 85 FR 86308, 86335 (Dec. 29, 2020). 

91 Id. at 86337. 92 Id. at 86339. 

As noted, the Bureau is concerned 

about the July 1, 2020 mandatory 

compliance date of the General QM 

Final Rule because requiring creditors to 

transition to the price-based General 

QM loan definition on July 1, 2021, and 

eliminating the Temporary GSE QM 

loan definition and the DTI-based 

General QM loan definition, could 

exacerbate these pandemic-related 

concerns about access to credit for some 

consumers. In the General QM Final 

Rule, the Bureau stated that maintaining 

access to responsible, affordable 

mortgage credit after the expiration of 

the Temporary GSE QM loan definition 

was a critical policy goal, and the 

Bureau found that the price-based 

approach would further this goal.90 The 

Bureau concluded that the General QM 

Final Rule’s pricing thresholds best 

balanced consumers’ ability to repay 

with ensuring access to responsible, 

affordable mortgage credit, including for 

minority consumers.91 However, 

compared to a market in which creditors 

could originate QM loans under the 

price-based approach in the revised 

General QM loan definition, the DTIbased General QM loan definition, or 

under the Temporary GSE QM loan 

definition, there would be a slightly 

smaller QM market and potentially 

reduced access to credit in a market in 

which creditors were limited to making 

General QM loans under the revised, 

price-based General QM loan definition. 

Extending the mandatory compliance 

date would retain flexibility for 

creditors to originate loans as QMs 

under the Temporary GSE QM loan 

definition and revised General QM loan 

definition for a longer period of time. 

Given the mortgage origination capacity 

concerns and the concentration of loans 

in the GSE channel described above, the 

Bureau preliminarily concludes it is 

appropriate to extend the mandatory 

compliance date of the General QM 

Final Rule to October 1, 2022 to ensure 

broad credit access under the particular 

circumstances arising from the COVID– 

19 pandemic, including for loans in the 

GSE channel. 

In addition, the Bureau preliminarily 

concludes that retaining a broad QM 

market until October 1, 2022, in which 

creditors could make QMs under the 

price-based approach in the revised 

General QM loan definition, the DTIbased General QM loan definition, or 

the Temporary GSE QM loan definition, 

would not significantly increase the 

likelihood that risky loans would 

inappropriately receive a rebuttable 

presumption of compliance with ability 

to repay requirements. In general, the 

Bureau expects that creditors will use 

comparable underwriting for loans 

within the DTI-based General QM loan 

definition and the Temporary GSE QM 

loan definition between July 1, 2021 and 

October 1, 2022 as they did for loans 

originated using those same definitions 

prior to March 1, 2021. As a result, the 

Bureau expects QM loans originated 

between July 1, 2021 and October 1, 

2022, using the General QM loan 

definition that was in effect prior to 

March 1, 2021 and the Temporary GSE 

QM loan definition, will have 

comparable risk levels to QM loans 

originated under those same definitions 

prior to March 1, 2021. 

Moreover, given the above-noted 

concerns about access to credit for 

certain consumers in the existing 

market, the Bureau has concerns about 

requiring creditors to transition to the 

price-based approach in the General QM 

loan definition on July 1, 2021. In part 

V.B.5 of the General QM Final Rule,92

the Bureau acknowledged that overall 

market spreads may expand and tighten 

over time. The Bureau noted that it 

monitors changing market and 

economic conditions, and it could 

consider changes to the pricing 

thresholds if circumstances warrant. 

The Bureau is concerned that, in the 


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93 85 FR 86308, 86386–87 (Dec. 29, 2020). 

unique circumstances arising from the 

COVID–19 pandemic, the combined 

effects of strong refinance demand, 

capacity constraints, and the volume of 

consumers with COVID–19 forbearance 

plans could incentivize creditors to 

increase mortgage interest rate spreads 

for some higher-risk consumers relative 

to consumers with cleaner credit. The 

Bureau is concerned that this unique 

situation may result in temporarily 

reduced credit access for some higherrisk yet creditworthy consumers than 

otherwise would be the case. 

Specifically, loans that exceed the 

pricing thresholds in the General QM 

Final Rule—including loans with DTI 

ratios below 43 percent and GSE loans— 

will generally not be eligible for QM 

status if the application is received on 

or after the mandatory compliance date 

of the General QM Final Rule. This 

includes some manufactured housing 

loans with loan amounts in excess of 

$110,260. While some of these 

consumers may be able to obtain QM 

loans due to creditor pricing responses 

or through other available QM loan 

categories, and other consumers may 

obtain non-QM loans at potentially 

higher prices, the Bureau is concerned 

that a portion of these consumers may 

not be able to obtain a mortgage at all. 

The Bureau anticipates that as mortgage 

rates increase, capacity constraints will 

be lifted, originator profitability will 

decline, and these access to credit 

concerns will eventually ease. 

Accordingly, given that the timing of 

these events is uncertain, the Bureau 

has preliminarily concluded that 

extending the mandatory compliance 

date to October 1, 2022 will assist 

consumers by avoiding unnecessarily 

constraining the mortgage market during 

a period of heightened volatility and 

stress due to the COVID–19 pandemic. 

The Bureau requests comment on all 

aspects of its proposal to delay the 

mandatory compliance date of the 

General QM Final Rule until October 1, 

2022. The Bureau requests comment on 

whether the market is likely to 

experience disruptions after the 

expiration of forbearance programs and 

foreclosure moratoriums and whether 

delaying the mandatory compliance 

date could provide additional flexibility 

in responding to those disruptions. The 

Bureau also requests comment on the 

extent to which some consumer 

segments are experiencing impaired 

access to credit and on whether 

delaying the mandatory compliance 

date could help address such access-tocredit concerns. The Bureau requests 

comment on whether the mandatory 

compliance date should be extended 

and, if so, whether the extension should 

be longer or shorter than the proposed 

delay to October 1, 2022. 

The Bureau also proposes that a final 

rule based on this proposal be effective 

60 days after publication in the Federal 

Register. The Bureau anticipates that 

this would make the final rule effective 

before the current July 1, 2021 

mandatory compliance date. 

Proposed Revisions to Commentary 

For the reasons described above, the 

Bureau is proposing to amend comment 

43–2 to reflect an extension of the 

mandatory compliance date of the pricebased General QM loan definition to 

October 1, 2022. 

Currently, comment 43–2 states that 

the Bureau’s revisions to Regulation Z 

contained in Qualified Mortgage 

Definition Under the Truth in Lending 

Act (Regulation Z): General QM Loan 

Definition published on December 29, 

2020 (2021 General QM Amendments) 

apply with respect to transactions for 

which a creditor received an application 

on or after March 1, 2021 (effective 

date). Comment 43–2 states further that 

compliance with the 2021 General QM 

Amendments is mandatory with respect 

to transactions for which a creditor 

received an application on or after July 

1, 2021 (mandatory compliance date). 

Comment 43–2 states further that, for a 

given transaction for which a creditor 

received an application on or after 

March 1, 2021 but prior to July 1, 2021, 

a person has the option of complying 

either with 12 CFR part 1026 as it is in 

effect, or with 12 CFR part 1026 as it 

was in effect on February 26, 2021, 

together with any amendments to 12 

CFR part 1026 that become effective 

after February 26, 2021, other than the 

2021 General QM Amendments. 

For the reasons described above, the 

Bureau proposes to change the 

references to July 1, 2021 in this 

comment to October 1, 2022. The 

proposal would not amend the portion 

of comment 43–2 that describes how to 

determine the application date. The 

explanations in part VII.C of the 

Supplementary Information to the 

General QM Final Rule regarding how 

the effective date, optional early 

compliance period, and mandatory 

compliance date apply to transactions 

would remain accurate, except that 

references to July 1, 2021 would apply 

to October 1, 2022 instead.93

43(e) Qualified Mortgages 

43(e)(2) Qualified Mortgages Defined— 

General 

The Bureau is proposing to add 

comment 43(e)(2)–1 to clarify the 

General QM loan definitions available to 

creditors for applications received on or 

after March 1, 2021 but prior to October 

1, 2022. Specifically, proposed 

comment 43(e)(2)–1 references comment 

43–2 and explains that, prior to the 

effective date of the 2021 General QM 

Amendments, § 1026.43(e)(2) provided a 

QM definition that, among other things, 

required that the ratio of the consumer’s 

total monthly debt to total monthly 

income at the time of consummation 

may not exceed 43 percent. Proposed 

comment 43(e)(2)–1 further explains 

that the 2021 General QM Amendments 

removed that requirement and replaced 

it with the APR thresholds in 

§ 1026.43(e)(2)(vi), among other 

revisions. Proposed comment 43(e)(2)–1 

explains that both the QM definition in 

§ 1026.43(e)(2) that was in effect prior to 

the 2021 General QM Amendments and 

the General QM loan definition in 

§ 1026.43(e)(2) as amended by the 2021 

General QM Amendments are available 

to creditors for transactions for which a 

creditor received an application on or 

after March 1, 2021 but prior to October 

1, 2022. Proposed comment 43(e)(2)–1 

cross-references comment 43–2 for an 

explanation of how creditors determine 

the date the creditor received the 

consumer’s application for purposes of 

that comment. 

43(e)(4) Qualified Mortgage Defined— 

Other Agencies 

Comment 43(e)(4)–2 currently 

provides that covered transactions that 

met the requirements of 

§ 1026.43(e)(2)(i) through (iii), were 

eligible for purchase or guarantee by the 

Federal National Mortgage Association 

(Fannie Mae) or the Federal Home Loan 

Mortgage Corporation (Freddie Mac) (or 

any limited-life regulatory entity 

succeeding the charter of either) 

operating under the conservatorship or 

receivership of the Federal Housing 

Finance Agency pursuant to section 

1367 of the Federal Housing Enterprises 

Financial Safety and Soundness Act of 

1992 (12 U.S.C. 4617), and for which the 

creditor received the consumer’s 

application prior to the mandatory 

compliance date of July 1, 2021, 

continue to be QMs, including those 

covered transactions that were 

consummated on or after July 1, 2021. 

The headers for comments 43(e)(4)–2 

and –3 refer to July 1, 2021 as the 

General QM Final Rule’s mandatory 

compliance date. 


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94HMDA requires many financial institutions to 

maintain, report, and publicly disclose loan-level 

information about mortgages. These data help show 

whether creditors are serving the housing needs of 

their communities; they give public officials 

information that helps them make decisions and 

policies; and they shed light on lending patterns 

that could be discriminatory. HMDA was originally 

enacted by Congress in 1975 and is implemented 

by Regulation C. See Bureau of Consumer Fin. Prot., 

Mortgage Data (HMDA), https://

www.consumerfinance.gov/data-research/hmda/. 

95Public Law 115–174, 132 Stat. 1296 (2018). 

96The comparable thresholds are 6.5 percentage 

points over APOR for loans priced under $66,156, 

3.5 percentage points over APOR for loans priced 

under $110,260 but at or above $66,156, and 6.5 

percentage points over APOR for loans for 

manufactured housing priced under $110,260. 12 

CFR 1026.43(e)(2)(vi)(A) through (D). 

97As of Q3 2020, only 105 loans had been 

originated through the GSEs’ High-LTV Refinance 

For the reasons described above, the 

Bureau proposes to change the 

references to July 1, 2021 in comment 

43(e)(4)–2 and in the headers for 

comments 43(e)(4)–2 and –3 to October 

1, 2022. 

V. Dodd-Frank Act Section 1022(b) 

Analysis 

A. Overview 

As discussed above, this proposal 

would delay the mandatory compliance 

date of the General QM loan definition 

from July 1, 2021 to October 1, 2022. In 

developing this proposal, the Bureau 

has considered the potential benefits, 

costs, and impacts as required by 

section 1022(b)(2)(A) of the Dodd-Frank 

Act. Specifically, section 1022(b)(2)(A) 

of the Dodd-Frank Act calls for the 

Bureau to consider the potential benefits 

and costs of a regulation to consumers 

and covered persons, including the 

potential reduction of access by 

consumers to consumer financial 

products or services, the impact on 

depository institutions and credit 

unions with $10 billion or less in total 

assets as described in section 1026 of 

the Dodd-Frank Act, and the impact on 

consumers in rural areas. The Bureau 

consulted with the prudential regulators 

and other appropriate Federal agencies 

regarding the consistency of the 

proposed rule with prudential, market, 

or systemic objectives administered by 

such agencies as required by section 

1022(b)(2)(B) of the Dodd-Frank Act. 

B. Data and Evidence 

The discussion in this impact analysis 

relies on data from a range of sources. 

These include data collected or 

developed by the Bureau, including 

HMDA 94 data, as well as other publicly 

available sources. In particular, the data 

and evidence published in the Bureau’s 

General QM Final Rule inform this 

analysis. The Bureau also conducted the 

Assessment and issued the Assessment 

Report as required under section 

1022(d) of the Dodd-Frank Act. The 

Assessment Report provides 

quantitative and qualitative information 

on questions relevant to the proposed 

rule, including the effect of QM status 

relative to non-QM status on access to 

credit. Consultations with other 

regulatory agencies, industry, and 

research organizations inform the 

Bureau’s impact analyses. 

The data the Bureau relied upon 

provide detailed information on the 

number, characteristics, pricing, and 

performance of mortgage loans 

originated in recent years. While these 

data allow the Bureau to estimate the 

number of mortgage loans historically 

that would have satisfied the different 

QM definitions applicable under the 

baseline or the proposal, the Bureau 

cannot estimate with precision how 

consumers may respond to changes in 

the QM definitions by obtaining 

alternative loan products or how 

creditors may respond by changing loan 

pricing or product offerings. The Bureau 

seeks additional information or data 

which could inform quantitative 

estimates of such consumer or creditor 

responses. The Bureau seeks comment 

on its analysis and additional 

information or data which could inform 

quantitative estimates of the number of 

consumers obtaining GSE-eligible loans 

which do not satisfy the consider and 

verify requirements in the revised 

General QM loan definition. 

C. Description of the Baseline 

The Bureau considers the benefits, 

costs, and impacts of the proposal 

against the baseline in which the Bureau 

takes no action and compliance with the 

revised General QM loan definition 

becomes mandatory on July 1, 2021, 

after which the Temporary GSE QM 

loan definition and the General QM loan 

definition that was in effect prior to 

March 1, 2021 expire and can no longer 

be used by creditors to obtain QM status 

on new mortgage loans. Under the 

proposal, the Temporary GSE QM loan 

definition and the General QM loan 

definition that was in effect prior to 

March 1, 2021 can continue to be used 

until October 1, 2022, the new 

mandatory compliance date of the 

revised General QM loan definition. As 

a result, the proposal’s direct market 

impacts would occur only during the 

period between July 1, 2021 and 

October 1, 2022. The impact analyses 

assume the GSEs will remain in 

conservatorship for the duration of this 

period, thus allowing creditors to use 

the Temporary GSE QM loan definition. 

Under the baseline, when the 

Temporary GSE QM loan definition and 

the General QM loan definition that was 

in effect prior to March 1, 2021 expire 

on July 1, 2021, conventional loans 

could only receive QM status under the 

Bureau’s rules by underwriting 

according to the revised General QM 

requirements, Small Creditor QM 

requirements, Balloon Payment QM 

requirements, the expanded portfolio 

QM amendments created by the 2018 

Economic Growth, Regulatory Relief, 

and Consumer Protection Act,95 or the 

Seasoned QM definition. The revised 

General QM loan definition, which 

would be the only type of QM available 

to larger creditors following the 

mandatory compliance date, generally 

requires loans to be priced less than 

2.25 percentage points above APOR.96

The Bureau anticipates that when the 

mandatory compliance date is reached, 

the main loans affected would be those 

priced 2.25 percentage points or higher 

above APOR that are either 

conventional loans with DTI ratios at or 

below 43 percent (Under-43-Percent-DTI 

conventional loans) or GSE-eligible 

loans. Retaining the July 1, 2021 

mandatory compliance date would 

affect these loans because they are 

currently originated as QM loans due to 

either the General QM loan definition 

that was in effect prior to March 1, 2021 

or the Temporary GSE QM loan 

definition but, absent changes in 

pricing, could not be originated as QM 

loans and may not be originated at all 

after the mandatory compliance date. 

The Bureau’s analysis of the market 

under the baseline focuses on Under-43- 

Percent-DTI conventional loans and 

GSE-eligible loans priced 2.25 

percentage points or higher above APOR 

because the Bureau estimates most loans 

newly obtaining QM status due to the 

proposal fall within those categories. A 

smaller number of GSE-eligible loans 

would not fall within the revised 

General QM loan definition because 

they do not satisfy the consider and 

verify requirements in the revised 

General QM loan definition. The Bureau 

also lacks the loan-level documentation 

and underwriting data necessary to 

estimate with precision the number of 

GSE-eligible loans that do not satisfy the 

consider and verify requirements in the 

revised General QM loan definition. 

These loans are largely restricted to 

certain streamlined refinance loans 

offered by the GSEs, and the Bureau 

estimates that in the current market 

such loans are considerably less 

numerous than Under-43-Percent-DTI 

conventional loans and GSE-eligible 

loans priced 2.25 percentage points or 

higher above APOR.97 However, 


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Option since the inception of the program. See 

FHFA Foreclosure Prevention and Refinance Report 

(Q3 2020), https://www.fhfa.gov/AboutUs/Reports/ 

ReportDocuments/3Q2020FPR.pdf. 

98This estimate assumes that the GSEs continue 

to originate loans priced 2.25 percentage points or 

higher above APOR between July 1, 2021 and 

October 1, 2022. If the GSEs do not originate loans 

above the General QM Final Rule’s pricing 

thresholds during this period, the Bureau estimates 

that approximately 28,000 additional consumers 

would obtain conventional QM loans priced 2.25 

percentage points or higher above APOR under the 

proposal. 

demand for such loans could increase if 

housing market conditions deteriorate. 

D. Potential Benefits and Costs to 

Covered Persons and Consumers 

1. Benefits to Consumers 

The primary benefit to consumers of 

the proposal is the availability of 

conventional QM loans priced 2.25 

percentage points or higher above 

APOR—including both Under-43- 

Percent-DTI conventional loans and 

GSE-eligible loans—during the period 

from July 1, 2021 to October 1, 2022. 

Relative to the baseline, the Bureau 

estimates that between July 1, 2021 and 

October 1, 2022, approximately 33,000 

additional consumers would obtain 

conventional QM loans priced 2.25 

percentage points or higher above APOR 

under the proposal due to the 

availability of the General QM loan 

definition that was in effect prior to 

March 1, 2021 and the Temporary GSE 

QM loan definition.98 While many of 

these consumers may obtain mortgages 

of some kind under the baseline, the 

largest benefits to consumers accrue to 

the consumers who would obtain a 

conventional QM loan under the 

proposal but would not obtain a 

mortgage under the baseline. 

Under the baseline, some of these 

33,000 consumers may be able to obtain 

General QM loans priced below 2.25 

percentage points over APOR due to 

creditor responses to the General QM 

Final Rule or obtain QM loans under the 

Small Creditor QM definition. Others 

may instead obtain FHA loans, likely 

paying higher total loan costs as 

discussed in the General QM Final Rule. 

Finally, a portion of these consumers 

may obtain non-QM loans under the 

baseline, but the Bureau expects some 

consumers may not be able to obtain a 

mortgage at all. 

The proposal would also benefit those 

consumers seeking GSE-eligible loans 

that do not satisfy the consider and 

verify requirements in the revised 

General QM loan definition. Such loans, 

including GSE streamlined refinance 

loans, may not be available to 

consumers under the baseline. 

2. Benefits to Covered Persons 

The proposal’s primary benefit to 

covered persons, specifically mortgage 

creditors, is the continued profits from 

originating QM loans priced 2.25 

percentage points or higher above 

APOR, particularly Under-43-PercentDTI conventional loans and GSE-eligible 

loans. For the estimated 33,000 

additional conventional QM loans 

priced 2.25 percentage points or higher 

above APOR under the proposal, the 

Bureau estimates an average loan size of 

$190,000 and thus a total loan volume 

of $6.3 billion. Under the baseline, after 

July 1, 2021, creditors would be unable 

to originate such loans under the 

General QM loan definition that was in 

effect prior to March 1, 2021 or the 

Temporary GSE QM loan definition and 

would instead have to originate such 

loans as FHA, Small Creditor QM, or 

non-QM loans, or originate at a price at 

or below 2.25 percentage points over 

APOR as General QM loans. Creditors’ 

current preference for originating QM 

loans priced 2.25 percentage points or 

more over APOR likely reflects 

advantages in a combination of costs or 

guarantee fees (particularly relative to 

FHA loans), liquidity (particularly 

relative to Small Creditor QM), or 

litigation and credit risk (particularly 

relative to non-QM). Moreover, QM 

loans are exempt from the Dodd-Frank 

Act risk retention requirement whereby 

creditors that securitize mortgage loans 

are required to retain at least 5 percent 

of the credit risk of the security, which 

adds significant cost. As a result, the 

proposal conveys benefits to mortgage 

creditors originating General QM and 

Temporary GSE QM loans on each of 

these dimensions. 

Given creditors’ preference for 

originating QM loans, the proposal may 

allow lenders to avoid price reductions 

on some loans that would be necessary 

to satisfy the revised General QM loan 

definition under the baseline. This 

would increase revenue for creditors on 

such loans originated during the July 1, 

2021 to October 1, 2022 period. 

3. Costs to Consumers 

For the duration of the July 1, 2021 to 

October 1, 2022 period, creditors who 

would have reduced prices on some 

loans to satisfy the revised General QM 

loan definition under the baseline may 

delay reducing loan prices under the 

proposal. This is likely to occur for 

some uncertain fraction of the estimated 

33,000 additional conventional loans 

within the General QM loan definition 

that was in effect prior to March 1, 2021 

and the Temporary GSE QM loan 

definition. Consumers obtaining such 

loans would pay higher prices for these 

conventional QM loans relative to the 

baseline. 

In addition, consumers who would 

have obtained non-QM loans under the 

baseline but instead obtain QM loans 

under the proposal forgo the benefit of 

retaining the ATR causes of action and 

defenses against foreclosure. 

4. Costs to Covered Persons 

The proposal would involve minimal 

costs to covered persons. The most 

sizable potential costs to covered 

persons are effectively transfers between 

creditors for the duration of the 

mandatory compliance date delay, 

reflecting temporarily reduced loan 

origination volume for creditors who 

primarily originate FHA or Under-43- 

Percent-DTI non-QM loans and 

temporarily increased origination 

volume for lenders who primarily 

originate Under-43-Percent-DTI 

conventional loans priced 2.25 

percentage points or more over APOR. 

5. Other Benefits and Costs 

In delaying the expiration of the 

General QM loan definition that was in 

effect prior to March 1, 2021, and the 

Temporary GSE QM loan definition, the 

proposal would delay any effects of the 

expiration on the development of the 

secondary market for private (non-GSE) 

mortgage loan securities. When the 

Temporary GSE QM loan definition 

expires, those loans that do not fit 

within the revised General QM loan 

definition represent a potential new 

market for private securitizations. Thus, 

the proposal would slightly reduce the 

scope of the potential non-QM market 

for the duration of the mandatory 

compliance date delay, likely lowering 

profits and revenues for participants in 

the private secondary market. This 

would effectively be a transfer from 

these private secondary market 

participants to participants in the 

agency secondary market. 

E. Potential Specific Impacts of the 

Proposed Rule 

1. Potential Impact on Depository 

Institutions and Credit Unions With $10 

Billion or Less in Total Assets, as 

Described in Section 1026 

The proposal’s expected impact on 

depository institutions and credit 

unions that are also creditors making 

covered loans (depository creditors) 

with $10 billion or less in total assets is 

similar to the expected impact on larger 

creditors and non-depository creditors. 

Those smaller creditors originating 

portfolio loans can originate Small 

Creditor QM loans priced 2.25 


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99These statistics are estimated based on 

originations from the first nine months of the year, 

to allow time for loans to be sold before HMDA 

reporting deadlines. 

100 5 U.S.C. 601 et seq. 

101Public Law 104–121, tit. II, 110 Stat. 857 

(1996). 

102 5 U.S.C. 601(3) (the Bureau may establish an 

alternative definition after consultation with the 

Small Business Administration and an opportunity 

for public comment). 

103 5 U.S.C. 603 through 605. 

104 5 U.S.C. 609. 

105 44 U.S.C. 3501 et seq. 

percentage points or higher above 

APOR, and thus may rely less on the 

General QM loan definition that was in 

effect prior to March 1, 2021 and the 

Temporary GSE QM loan definition for 

originating such loans. If the General 

QM mandatory compliance date would 

confer a competitive advantage to these 

small creditors in their origination of 

loans priced 2.25 percentage points or 

higher above APOR, the proposal would 

delay this outcome. 

2. Potential Impact of the Proposed 

Provisions on Consumers in Rural Areas 

The proposal’s expected impact on 

consumers in rural areas is similar or 

slightly larger than the expected impact 

on non-rural areas. Based on 2018 

HMDA data, the Bureau estimates that 

loans priced 2.25 percentage points or 

higher above APOR that are either 

Under-43-Percent-DTI conventional 

loans or GSE-eligible loans reflect a 

slightly larger share of the conventional 

loan market in rural areas (0.8 percent) 

relative to non-rural areas (0.6 

percent).99

VI. Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act 

(RFA),100 as amended by the Small 

Business Regulatory Enforcement 

Fairness Act of 1996,101 requires each 

agency to consider the potential impact 

of its regulations on small entities, 

including small businesses, small 

governmental units, and small not-forprofit organizations. The RFA defines a 

‘‘small business’’ as a business that 

meets the size standard developed by 

the Small Business Administration 

pursuant to the Small Business Act.102

The RFA generally requires an agency 

to conduct an initial regulatory 

flexibility analysis (IRFA) and a final 

regulatory flexibility analysis (FRFA) of 

any rule subject to notice-and-comment 

rulemaking requirements, unless the 

agency certifies that the rule would not 

have a significant economic impact on 

a substantial number of small 

entities.103 The Bureau also is subject to 

certain additional procedures under the 

RFA involving the convening of a panel 

to consult with small business 

representatives prior to proposing a rule 

for which an IRFA is required.104

An IRFA is not required for this 

proposal because the proposal, if 

adopted, would not have a significant 

economic impact on a substantial 

number of small entities. The Bureau 

does not expect the final rule to impose 

costs on small entities relative to the 

baseline. Under the baseline, on July 1, 

2021, the Temporary GSE QM loan 

definition and the General QM loan 

definition that was in effect prior to 

March 1, 2021 expire, and therefore no 

creditor—including small entities— 

would be able to originate QM loans 

under either definition after that date. 

Under the proposal, small entities that 

would otherwise not be able to originate 

QM loans under these definitions would 

be able to originate such loans with QM 

status until October 1, 2022. Thus, the 

Bureau anticipates that the proposal 

would only reduce burden on small 

entities relative to the baseline. 

Accordingly, the Acting Director 

certifies that this proposal, if adopted, 

would not have a significant economic 

impact on a substantial number of small 

entities. The Bureau requests comment 

on its analysis of the impact of the 

proposal on small entities and requests 

any relevant data. 

VII. Paperwork Reduction Act 

Under the Paperwork Reduction Act 

of 1995 (PRA),105 Federal agencies are 

generally required to seek, prior to 

implementation, approval from the 

Office of Management and Budget 

(OMB) for information collection 

requirements. Under the PRA, the 

Bureau may not conduct or sponsor, 

and, notwithstanding any other 

provision of law, a person is not 

required to respond to, an information 

collection unless the information 

collection displays a valid control 

number assigned by OMB. 

The proposal would amend 12 CFR 

part 1026 (Regulation Z), which 

implements TILA. OMB control number 

3170–0015 is the Bureau’s OMB control 

number for Regulation Z. The Bureau 

has determined that this proposal does 

not contain any new or substantively 

revised information collection 

requirements other than those 

previously approved by OMB under that 

OMB control number 3170–0015. 

The Bureau welcomes comments on 

these determinations or any other aspect 

of the proposal for purposes of the PRA. 

List of Subjects 

Advertising, Banks, Banking, 

Consumer protection, Credit, Credit 

unions, Mortgages, National banks, 

Reporting and recordkeeping 

requirements, Savings associations, 

Truth-in-lending. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the Bureau proposes to 

amend Regulation Z, 12 CFR part 1026, 

as set forth below: 

PART 1026—TRUTH IN LENDING 

(REGULATION Z) 

■ 1. The authority citation for part 1026 

continues to read as follows: 

Authority: 12 U.S.C. 2601, 2603–2605, 

2607, 2609, 2617, 3353, 5511, 5512, 5532, 

5581; 15 U.S.C. 1601 et seq. 

■ 2. In supplement I to part 1026: 

■ a. Under Section 1026.43—Minimum 

Standards for Transactions Secured by 

a Dwelling, revise introductory 

paragraph 2; 

■ b. Under section 43(e)(2) Qualified 

mortgage defined—general, add 

paragraph 1; and 

■ c. Revise section 43(e)(4) Qualified 

mortgage defined—other agencies. 

The revisions and addition read as 

follows: 

Supplement I to Part 1026—Official 

Interpretations 

* * * * * 

Section 1026.43—Minimum 

Standards for Transactions Secured by a 

Dwelling 

* * * * * 

2. General QM Amendments Effective 

on March 1, 2021. The Bureau’s 

revisions to Regulation Z contained in 

Qualified Mortgage Definition Under the 

Truth in Lending Act (Regulation Z): 

General QM Loan Definition published 

on December 29, 2020 (2021 General 

QM Amendments) apply with respect to 

transactions for which a creditor 

received an application on or after 

March 1, 2021 (effective date). 

Compliance with the 2021 General QM 

Amendments is mandatory with respect 

to transactions for which a creditor 

received an application on or after 

October 1, 2022 (mandatory compliance 

date). For a given transaction for which 

a creditor received an application on or 

after March 1, 2021 but prior to October 

1, 2022, a person has the option of 

complying either: With 12 CFR part 

1026 as it is in effect; or with 12 CFR 

part 1026 as it was in effect on February 

26, 2021, together with any amendments 

to 12 CFR part 1026 that become 

effective after February 26, 2021, other 


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than the 2021 General QM 

Amendments. For transactions subject 

to § 1026.19(e), (f), or (g), creditors 

determine the date the creditor received 

the consumer’s application, for 

purposes of this comment, in 

accordance with § 1026.2(a)(3)(ii). For 

transactions that are not subject to 

§ 1026.19(e), (f), or (g), creditors can 

determine the date the creditor received 

the consumer’s application, for 

purposes of this comment, in 

accordance with either § 1026.2(a)(3)(i) 

or (ii). 

* * * * * 

43(e)(2) Qualified Mortgage Defined— 

General 

1. General QM Amendments Effective 

on March 1, 2021. Comment 43–2 

provides that, for a transaction for 

which a creditor received an application 

on or after March 1, 2021 but prior to 

October 1, 2022, a person has the option 

of complying either: With 12 CFR part 

1026 as it is in effect; or with 12 CFR 

part 1026 as it was in effect on February 

26, 2021, together with any amendments 

to 12 CFR part 1026 that become 

effective after February 26, 2021, other 

than the revisions to Regulation Z 

contained in Qualified Mortgage 

Definition Under the Truth in Lending 

Act (Regulation Z): General QM Loan 

Definition published on December 29, 

2020 (2021 General QM Amendments). 

Prior to the effective date of the 2021 

General QM Amendments, 

§ 1026.43(e)(2) provided a qualified 

mortgage definition that, among other 

things, required that the ratio of the 

consumer’s total monthly debt to total 

monthly income at the time of 

consummation not exceed 43 percent. 

The 2021 General QM Amendments 

removed that requirement and replaced 

it with the annual percentage rate 

thresholds in § 1026.43(e)(2)(vi), among 

other revisions. Both the qualified 

mortgage definition in § 1026.43(e)(2) 

that was in effect prior to the 2021 

General QM Amendments and the 

qualified mortgage definition in 

§ 1026.43(e)(2) as amended by the 2021 

General QM Amendments are available 

to creditors for transactions for which a 

creditor received an application on or 

after March 1, 2021 but prior to October 

1, 2022. See comment 43–2 for an 

explanation of how creditors determine 

the date the creditor received the 

consumer’s application for purposes of 

that comment. 

* * * * * 

43(e)(4) Qualified Mortgage Defined— 

Other Agencies 

1. General. The Department of 

Housing and Urban Development, 

Department of Veterans Affairs, and the 

Department of Agriculture have 

promulgated definitions for qualified 

mortgages under mortgage programs 

they insure, guarantee, or provide under 

applicable law. Cross-references to those 

definitions are listed in § 1026.43(e)(4) 

to acknowledge the covered transactions 

covered by those definitions are 

qualified mortgages for purposes of this 

section. 

2. Mortgages for which the creditor 

received the consumer’s application 

prior to October 1, 2022. Covered 

transactions that met the requirements 

of § 1026.43(e)(2)(i) thorough (iii), were 

eligible for purchase or guarantee by the 

Federal National Mortgage Association 

(Fannie Mae) or the Federal Home Loan 

Mortgage Corporation (Freddie Mac) (or 

any limited-life regulatory entity 

succeeding the charter of either) 

operating under the conservatorship or 

receivership of the Federal Housing 

Finance Agency pursuant to section 

1367 of the Federal Housing Enterprises 

Financial Safety and Soundness Act of 

1992 (12 U.S.C. 4617), and for which the 

creditor received the consumer’s 

application prior to the mandatory 

compliance date of October 1, 2022 

continue to be qualified mortgages for 

the purposes of this section, including 

those covered transactions that were 

consummated on or after October 1, 

2022. 

3. Mortgages for which the creditor 

received the consumer’s application on 

or after March 1, 2021 and prior to 

October 1, 2022. For a discussion of the 

optional early compliance period for the 

2021 General QM Amendments, please 

see comment 43–2. 

4. [Reserved]. 

5. [Reserved]. 

* * * * * 

Dated: March 2, 2021. 

David Uejio, 

Acting Director, Bureau of Consumer 

Financial Protection. 

[FR Doc. 2021–04698 Filed 3–3–21; 4:15 pm] 

BILLING CODE 4810–AM–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2020–1182; Product 

Identifier 2018–SW–036–AD] 

RIN 2120–AA64 

Airworthiness Directives; Airbus 

Helicopters 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to 

supersede Airworthiness Directive (AD) 

2016–08–20 for certain Airbus 

Helicopters (previously Eurocopter 

France) EC130B4 and EC130T2 

helicopters. AD 2016–08–20 requires 

repetitively inspecting the tail boom to 

Fenestron junction frame (junction 

frame) for a crack. Since the FAA issued 

AD 2016–08–20, additional cracks have 

been reported and a design change that 

modifies the junction frame has become 

available. This proposed AD would 

continue to require inspecting the 

junction frame with the horizontal 

stabilizer removed, and would propose 

to expand the applicability, revise the 

compliance time and the inspection 

procedures for inspecting the junction 

frame, add inspection procedures for 

certain helicopters, allow repair of the 

junction frame, and would require 

modifying and then repetitively 

inspecting the junction frame and 

reporting certain information. The 

actions of this proposed AD are 

intended to address an unsafe condition 

on these products. 

DATES: The FAA must receive comments 

on this proposed AD by April 5, 2021. 

ADDRESSES: You may send comments by 

any of the following methods: 

• Federal eRulemaking Docket: Go to 

https://www.regulations.gov. Follow the 

online instructions for sending your 

comments electronically. 

• Fax: 202–493–2251. 

• Mail: Send comments to the U.S. 

Department of Transportation, Docket 

Operations, M–30, West Building 

Ground Floor, Room W12–140, 1200 

New Jersey Avenue SE, Washington, DC 

20590–0001. 

• Hand Delivery: Deliver to the 

‘‘Mail’’ address between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

Examining the AD Docket 

You may examine the AD docket on 

the internet at https:// 


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