CFPB Issues Final Rule Extending the GSE Patch


The Consumer Financial Protection Bureau (CFPB) has issued a final rule to extend the government-sponsored enterprise (GSE) “patch” until the mandatory compliance date of a final rule amending the general qualified mortgage (QM) loan definition in Regulation Z.

The GSE patch, which provides QM status to certain mortgage loans eligible for purchase or guarantee by either of the Fannie Mae or Freddie Mac, was scheduled to expire on January 10, 2021.

Notably, the CFPB is not amending the provision in Regulation Z stating that the GSE patch will expire if the GSEs exit conservatorship.

In releasing the final rule, the CFPB is taking steps to ensure a smooth and orderly transition away from the GSE patch and to maintain access to responsible, affordable mortgage credit upon its expiration. Further, the bureau is taking this action to ensure that responsible, affordable credit remains available to consumers who may be affected if the GSE patch expires before the mandatory compliance date of a final rule amending the general QM loan definition. (The CFPB issued a proposal to amend the general QM loan definition in June and is currently developing a final rule.)

GSE patch loans are eligible for QM status even if the debt-to-income ratio exceeds 43 percent. Last year, the CFPB released an assessment of the ATR/QM rule and found that GSE patch loans represent a large and persistent share of mortgage originations: Approximately 957,000 mortgage loans would be affected by the expiration of the GSE patch.

To read the final rule, click here.

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