Kroll Bond Rating Agency (KBRA) discusses the changes to the final Qualified Mortgage (QM) Rule issued by the Consumer Financial Protection Bureau (CFPB) in December 2020. We also evaluate the potential effects of the rule on origination, RMBS issuance, and credit risks.

In our view, some of the more significant impacts of the final QM Rule include the following:

  • An increase in purported QM originations as a result of the broader QM definition including, for example, “Alt-Doc” QM.
  • A likely strengthening of the relationship between a loan’s credit quality and its QM status as a result of the new price-based approach. Further, it potentially introduces non-prime credit attributes into the QM market.
  • The potential for greater ability-to-repay (ATR) litigation risks under the new versus previous QM definition due to more subjective standards associated with QM status potentially resulting in the front-loading of litigation expenses typically associated with non-QM loans.

Click here to view the report.

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe is located at 6-8 College Green, Dublin 2, Ireland.