Sector developments and company hires

QM price-based approach mooted
The CFPB has issued two notices of proposed rulemaking (NPRMs) to address the impending expiration of the GSE patch, which is scheduled to expire in January 2021 (or when the GSEs exit conservatorship, if that happens first). The bureau estimates that, absent regulatory action, approximately 957,000 mortgage loans would be affected by the expiration of the GSE patch and that many of these loans would either not be made or would be made but at a higher price.

Consequently, in the first NRPM, the bureau proposes to amend the general QM definition in Regulation Z to replace the DTI limit with a price-based approach. For eligibility for QM status under the general QM definition, the bureau is proposing a price threshold for most loans, as well as higher price thresholds for smaller loans. The NPRM also proposes that lenders take into account a consumer’s income, debt and DTI ratio or residual income and verify the consumer’s income and debts.

In the second NPRM, the bureau proposes to amend Regulation Z to extend the GSE patch to expire upon the effective date of a final rule regarding the first notice’s proposed amendments to the general QM loan definition in Regulation Z.

In other news…

Fund acquisition
Mount Logan Capital and Sierra Crest Investment Management (SCIM) have entered into a definitive agreement to acquire certain assets from Resource America and for SCIM to become the investment adviser of the Resource Credit Income Fund (CIF). CIF is a closed-end interval fund, with approximately US$240m of assets under management as of 31 May 2020, that invests across credit markets, including direct credit, private credit and public credit. The transaction is expected to close in 4Q20 and is subject to approval by the shareholders of CIF. On the closing date, it is expected that Mount Logan will fund SCIM and that substantially all of the economic benefit derived by SCIM under the advisory agreement will flow to Mount Logan. It is expected that certain members of the fund’s existing management team will be retained.