New mortgage rules have some wiggle room

NEW YORK – Dec. 3, 2013 – Wells Fargo, J.P. Morgan Chase, Bank of America and Citigroup will probably issue some mortgage loans that don’t meet the definition of a qualified mortgage (QM).

The new gold-standard lending definition – part of sweeping mortgage regulations set to take effect next month – allows banks to show that they’ve met all the new requirements created to ensure that borrowers can afford their mortgages.

However, lenders aren’t barred from making loans that fall outside the QM rules. They simply could face a greater legal liability on other loans.

The rules should keep lending standards fairly conservative, but most consumers shouldn’t notice any major changes because “many lenders are already acting as if the rule is in place,” according to Michael Fratantoni, vice president for research at the Mortgage Bankers Association.

Big banks will likely limit the nonconforming loans to wealthy clients.

Source: Wall Street Journal (12/03/13) Timiraos, Nick