On Jan. 10, 2021, the Consumer Financial Protection Bureau’s (CFPB) “QM Patch” will expire, meaning that Fannie Mae and Freddie Mac will no longer be allowed to back loans for consumers with DTI greater than 43 percent. The impact on loan officers will be dramatic.
Tom Hutchens is Senior Vice President of Sales and Marketing at Angel Oak Mortgage SolutionsAccording to CoreLogic, the patch—a seven-year exception granted by CFPB in 2014 to the Dodd-Frank Law—has allowed Fannie Mae and Freddie Mac (only those two GSEs) to take on loans featuring DTIs as high as 50 percent. CoreLogic reports that in 2018, almost 16 percent of all loans, worth $260 billion, would not have been allowed QM status as proscribed by Dodd-Frank.
When the QM Patch expires, many more potential borrowers will need to obtain non-QM loans to purchase their homes. For loan officers who offer and focus on non-QM loans, the marketplace will expand dramatically. Those brokers and originators who have found it unnecessary to serve non-QM borrowers may find their pool of prospects significantly reduced.