FDIC COVID Consumer 29 – Qualified Mortgage Status. Does providing a loan modification impact an existing loan’s qualified mortgage (QM) status?

Compliance > COVID & Pandemic-Related
Q:   Qualified Mortgage Status. Does providing a loan modification impact an existing loan’s qualified mortgage (QM) status?
 
A:   No. Mortgage originations are typically subject to the CFPB’s Ability to Repay and Qualified Mortgage Rule (ATR/QM). The ATR/QM rule does not apply when you alter the terms of an existing loan without refinancing it. A loan modification that does not meet the definition of a refinancing in Regulation Z at § 1026.20(a) is not subject to the ATR/QM rule, and, accordingly, would not alter the QM status of a loan that was a QM at origination. As the CFPB notes in its Small Entity Compliance Guide: “The Truth in Lending Act applies to a loan modification only if it is considered a refinancing under Regulation Z. If a loan modification is not subject to the Truth in Lending Act, it is not subject to the ATR/QM rule. Therefore, you should determine if a loan modification is a refinancing to see if the ATR/QM rule applies.  You will find the rules for determining whether a loan workout is a modification or a refinance in Regulation Z at § 1026.20(a) and accompanying Commentary.”
 
 
This Q&A was contained in the Frequently Asked Questions for Financial Institutions Affected by the Coronavirus Disease 2019 (Referred to as COVID-19) – As of March 3, 2021 (which may be updated from time to time).  This may be found on the FDIC’s website here:  https://www.fdic.gov/Coronavirus/faq-fi.pdf.
 

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