MPF Program Updates for Revised Qualified Mortgage Rule
Effective Date: Immediately
The MPF program is publishing MPF Guides incorporating updates regarding the Revised Qualified Mortgage (“QM”) rule for MPF Traditional, announced in MPF Announcement 2021-41 and MPF Announcement 2021-42.
No changes have been made to the requirement that only Qualified Mortgage (QM) loans that meet all of the General QM “safe harbor” requirements under Truth in Lending Act and Regulation Z, or government loans that meet the applicable government agency’s QM requirements, are eligible for sale to the MPF Program. It continues to be the PFI’s responsibility to ensure compliance with the Revised QM Rule.
For manually underwritten loans, no substantive changes are being made to applicable MPF Guide underwriting and eligibility guidelines, including the current requirement that manually underwritten loans not exceed a maximum 43% DTI.
PFIs will be required to:
- consider the borrower’s current or reasonably expected income or assets other than the value of the dwelling (including any real property attached to the dwelling) that secures the loan, debt obligations, alimony, child support, and DTI ratio or residual income, as provided for in TILA/Regulation Z (including 12 CFR 1026.43), and the underwriting and eligibility guidelines of the applicable MPF Guides
- verify the borrower’s current or reasonably expected income or assets other than the value of the dwelling (including any real property attached to the dwelling) that secures the loan and the consumer’s current debt obligations, alimony, and child support, using verification standards relevant provisions from Fannie Mae’s Single Family Selling Guide Sections B3-3 through B3-6 as provided for in Regulation Z.
- ensure the APR versus APOR spread meets the TILA/Regulation Z requirements for Safe Harbor QM (i.e. for 1st liens: spread must be less than 1.5%)
To avoid confusion, where the above mentioned Fannie Mae Selling Guide verification requirements conflict with guidance in the MPF Guides, the Fannie Mae verification requirements will control.
The Fannie Mae Selling Guides will not supersede any of the MPF Guide requirement to consider a borrower’s current or reasonably expected income or assets. The Fannie Mae Selling Guides should only be used as the standards used to verify the borrower’s current or reasonably expected income or assets. Nothing in the Fannie Mae Selling Guides supersedes a PFI’s obligation to consider a borrower’s current or reasonably expected income or assets, as provided for above, in TILA/Regulation Z (including 12 CFR 1026.43), and the underwriting and eligibility guidelines of the MPF Guides, including a 43% DTI.
Automated Underwriting Systems (AUS)
PFIs will be permitted to continue utilizing DU and LPA automated underwriting systems (“AUS”) for MPF Traditional Conventional loans. Loans will have to meet all the QM safe harbor requirements including the applicable APR to average prime offer rate (APOR) spread, and MPF Guide requirements. No changes have been made to the applicable MPF Guides or existing MPF Program overlays.
PFIs can begin applying the policies in these MPF Guides immediately but must apply them to all loans with application dates on or after July 1, 2021. Single-closing construction-to-permanent loans with application dates prior to July 1, 2021 that meet the QM rule in effect prior to March 1, 2021 (and do not meet Revised QM rule) can be delivered on or before February 28, 2022.
All otherwise eligible loans with application dates prior to July 1, 2021 may be delivered after August 31, 2021 provided the loans otherwise meet the Revised QM Rule and the MPF Program revised QM policies.
To be eligible for purchase, loans that do not meet the Revised QM Rule Loans but comply with the QM requirements in effect prior to March 1, 2021, must:
- have application dates on or before June 30, 2021, and
- be delivered on or before August 30, 2021.
PFIs are encouraged to work with MPF Service Center to ensure loans that do not meet the Revised QM Rule are delivered to the MPF Program by August 30, 2021.
Chapter 126.96.36.199 of the MPF Program Guide and Chapters 4.2.2, 5.8 and 5.10 of the MPF Traditional Selling Guide will be revised to reflect these updates.
Visit the MPF Website to review and register for upcoming complimentary MPF Webinars.
- MPF Announcement - 2021-49