Qualified Mortgages Rules: Effective Friday January 10, 2014
Effective today, Friday January 10, 2014, the new QM Mortgages Rule, Qualified Mortgages Rules, come into effect. The Qualified Mortgages Rule, QM Rule, has been implemented to take effect today in order to alleviate the risks associated with mortgage loan default rates and foreclosure rates among mortgage loan borrowers. The newly created CFPB, The Consumer Financial Protection Bureau, is the self regulatory organization that has issued the Qualified Mortgages Rule.
Objective Of Qualified Mortgages: QM Is The Ability To Repay
The objective of Qualified Mortgages Rule is the ability to repay and the ability for a mortgage loan borrower to afford the mortgage loan payments. Mortgage lenders are responsible to qualify a mortgage loan borrower’s income, assets, debt, and credit scores to determine whether the borrower will be able to afford their mortgage payments.
Debt to income ratios will be scrutinized and verified more intensely than ever before.
New Qualified Mortgages Rule: What Is Qualifed Mortgages
The ability to repay and afford is the main focus of the Qualified Mortgages Rule of 2014. The main factor in determining whether the mortgage borrower has the ability to repay is by determining their debt to income ratios. On conventional mortgage loans, the back end to income ratios are capped at no greater than 43%. Compensatng factors will play a major role in approving a mortgage loan. Fees on mortgage loans cannot exceed more than 3% of the mortgage loan amount. Examples of fees and charges are points, origination charges, underwriting fees, title insurance, and other fees associated with the origination of the mortgage loan. Reserves may be required and its up to the mortgage underwriter to determine if the mortgage loan borrower has enough reserves. Borderline mortgage files will be scrutinized even more where this can cause delays in getting a mortgage loan cleared to close. Underwriting time will probably take longer than it did back in 2013. Down payment requirements will still remain the same for first time home buyers. 3.5% down payment for FHA loans and 5% down payment for conventional loans. Many mortgage bankers and mortgage brokers are still in the implementation phase to today’s new QUALIFIED MORTGAGE RULES. We will keep you posted.