All mortgage borrowers must still demonstrate an ability to repay, whether or not they have QM status. There also are new consumer protections in the revised QM including a 225-basis-point maximum annual percentage rate over average prime offer rate limit for other QM loans outside the safe harbor. "The new rule does not replace any of the safe product features, which are embedded in the law," said Meg Burns, executive vice president of the Housing Policy Council. The Bureau is not proposing to amend the provision stating that the Temporary GSE QM loan category would expire if the GSEs exit conservatorship. In addition, QM loans still forbid the kind of features that gave rise to ability-to-repay issues during the Great Recession’s housing crash, such as no-documentation underwriting, negative amortization or interest only structures. QM loan definition with a provision that extends the Temporary GSE QM loan definition to expire upon the effective date of final amendments to the General QM loan definition. Safe Harbor status offers the most assurance that a loan meets ability-to-repay requirements. Many mortgage lenders may elect not to offer non-QM loans, or may price them considerably higher than QM loans. Several consumer protections in the ability-to-repay rule still apply under both the new and old QM definitions, both of which remain available for voluntary use.įor example, there’s still a requirement that the annual percentage rate can’t exceed 150 basis points over the annual prime offer rate for QM Safe Harbor status. Non-QM loans are expected to be higher priced loans that may have features historically associated with subprime loan products, and are likely to be made to consumers with the lowest acceptable credit scores (high credit risk). “So many consumers have been hit hard by the pandemic and the economic downturn, and we want to ensure that responsible, affordable mortgages remain available,” Dave Uejio, the CFPB's acting director, said in a press release. The small market for short reset adjustable-rate mortgages with a fixed rate period that lasts for five years or less, for example, will not meet the new QM definition. The new QM rule retains a lot of flexibility for the GSEs, but there are some rare exceptions. There is a real concern that the Dodd-Frank Acts mortgage reforms will reduce the availability of mortgage credit because lenders fear liability for making. The 15-month delay in mandating use of the new QM rule could make mortgage companies more comfortable selling loans in the QM category to either the GSEs or the private market for a longer period of time. All Qualified Mortgages (QM) are presumed to comply with this requirement.
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