End of ‘Qualified Mortgage Patch’ Could Hurt Low-Income Buyers

The Consumer Financial Protection Bureau plans to let the “qualified mortgage patch,” a regulatory loophole that allows low-income buyers to take on more debt to buy a home, expire in January 2021, MarketWatch reports.

The CFPB has also started fielding comments from the public as to what should replace the patch.

In particular, this regulatory loophole or “patch” allowed Fannie Mae and Freddie Mac to purchase loans where the borrower’s debt-to-income ratio exceeded the standard of 43% set by the Ability to Repay/Qualified Mortgage Rule. In cases where the debt-to-income ratio went above the 43% limit, a loan could still obtain “QM status” if other factors were considered to ensure a borrower’s ability to repay.

A March 2019 study from the Urban Institute found that roughly 3.3 million mortgages, equivalent to 19% of the loans sold to Fannie and Freddie between 2014 and 2018, were made possible by the regulatory loophole.

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