What Real Estate Agents Need to Know About the Qualified Mortgage Rules! The Consumer Finance Protection Bureau has created a Qualified Mortgage Rule (QM) which goes hand-in-hand with Ability-to-Repay rules (ATR). In a nutshell, here’s a simplified explanation of what QM is all about and how it will affect you and your borrowers when applying for a mortgage loan starting January 10, 2014. The Mandatory Product Features for all Qualified Mortgages (QMs) are as follows: • Points and fees are not supposed to exceed 3% of the loan amount based on the following: o The 3% limit is for loans that are $100,000 or higher o $3,000 for a loan amount between $60,000 and $99,999. o 5 percent of the total loan amount between $20,000 and $59,999 o $1,000 for a loan amount between $12,500 and $19,999 o 8 percent of the total loan amount for loans less than $12,500 • No risky features are allowed, such as negative amortization, interest-only, or balloon loans • Maximum loan term must be 30 years or less. The three main categories of a QM loan are as follows: 1. General Definition of QM Loans – any loan that meets the product feature requirements with a debt-to-income ratio of 43% or less 2. Types of QM loans – FHA, VA, Conventional (Fannie & Freddie) and USDA 3. Small Creditor Category of QM loans – If a mortgage company, small community bank or credit union that has less than $2 billion in assets originates 500 or fewer first mortgages per year AND holds the loan in their portfolio, the 43% does not apply, but they must still verify the borrower’s ability to repay the loan. What does this mean to you and your clients? • Underwriting will be more strict • More documentation will be required • Pre-approvals become MORE important than ever before • Re-verification of income, credit and assets will be required before closing Some lenders will be offering Non-Qualifying Mortgage loans, but you can be assured that the lender will make sure that all Ability-To-Repay requirements are met. An example of a Non-QM loan would be Jumbo Mortgage with Interest Only payments. Let’s meet to discuss how QM and ATR works – I would really like to assist you in your next real estate sale, and help you and your buyer navigate through all the new rules.
Posted on: Fri, 14 Mar 2014 15:41:22 +0000
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