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New Report Warns of Problems After GSE Patch Expires

Friday, July 12, 2019
Phil Hall | National Mortgage Professional Magazine
Michael Calhoun

The question of what will happen in mortgage lending after the government-sponsored enterprise (GSE) Patch expire in January 2021 is the focus of a new report published by the Center for Responsible Lending (CRL).


A Smarter Qualified Mortgage Can Benefit Borrowers, Taxpayers, and the Economy” calls on the Consumer Financial Protection Bureau (CFPB) to formulate a strategy that would address mortgage origination when the GSE Patch option has ended. The CRL noted that 3.3 million loans guaranteed by the GSEs over the last five years—roughly 19 percent of the total approved volume—would not have been considered as Qualified Mortgages (QM) because they failed to meet the 43 percent debt-to-income (DTI) limit. would thus have a dramatic impact on mortgage lending in the country. CRL’s report finds that such disruption would not be justified because statistical analysis demonstrates that, on its own, DTI is only minimally predictive of risk for near-prime loans.