CFPB Is Evaluating The Impact Of Their Qualified Mortgage (QM) Rules

CFPB Is Evaluating The Impact Of Their Qualified Mortgage (QM) Rules.  In a blog I wrote on December 26, 2013 titled Overview Of The CFPB QM Rules Going Into Efect On January 10, 2014 I stated:

The Qualified Mortgage (QM) Rules were crafted by the Consumer Financial Protection Bureau (CFPB) with the intent to protect both Consumers and Lenders, but the proof of this will come once the QM Rules are in place, and their impact felt.

Well the CFPB QM Rules have only been in place since January and issues are already popping up, especially with the "Ability To Pay" component of the QM Rules.  The "Ability to Pay" section of the QM Rules limits Lenders to 3% for points and fees, including fees to affiliates, such as Title Insurance Companies.  The 3% restriction has very little impact on higher end loans, but on lower end loans, such as those purchase by most First Time Buyers it has already become a big problem.

Many fees associated with a loan are fixed, and do not adjust with the size of the mortgage.  The end result is mortgages on lower price mortgages reach the 3% very quickly and the loan no longer meets the QM Rules "Ability To Pay" requirements.  This leaves the Lender with two choices:

• Approve the loan and not be protected by QM, or
• Deny the loan because the Lender cannot risk having to repurchase mortgages which fall outside of the QM Safe Harbor.

If you have not guessed yet what choice Lenders are making, let me eliminate the suspense, they are denying the loans.

So this rule which was put into place to protect Borrowers is actually preventing qualified Borrowers from being approved for a loan.  This is happening so much, that it has even gotten the CFPB's attention, and gotten this very INFLEXIBLE government entity to reconsider their position.

The expectation is the CFPB will modify their QM Rule "Ability To Pay" guideline to take the impact of the 3% maximum on points and fees into consideration on lower size loans.  How the new guideline will look is not known yet, but it is good to know they are acknowledging they made a mistake in not considering the impact of this rule on lower price home purchases.

I hope to have more information on this soon, and will write a blog as soon as I have more details on what the change will look like.  In the mean time it is encouraging the CFPB Is Evaluating The Impact Of Their Qualified Mortgage (QM) Rules.

 

 

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George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com