The Urban
Institute (UI) has looked at a final mortgage rule issued by the Consumer
Financial Protection Bureau (CFPB) in late 2020 which would provide a 3-year
pathway to safe harbor
for loans that are a rebuttable presumption or
nonqualified mortgage at origination.
The study, by UI analysts Karan Kaul,
Laurie Goodman, and Jun Zhu found that loan performance during the first three
years of the mortgage term is a better predictor of subsequent loan performance
than the rate spread. The rule requires
that both rebuttable presumption and nonqualified conventional first-lien
mortgages can be deemed safe harbor 36 months after origination if they are
held on the originator’s balance sheet. They may also be sold once and then
held as a whole loan on the buyer’s balance sheet for the entire three-year
period. These loans cannot be 30 days delinquent more than twice nor have any 60-day
delinquencies during the three-year seasoning period.

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