Qualified Mortgage (QM) process outlined
The federal government’s Consumer Financial Protection Bureau (CFPB) issued a rule for the qualified mortgage (QM) that becomes effective in January 2014. The QM creates consumer protection rules for mortgage lending that could make it harder for some buyers to get a mortgage.
The QM information recently released gives loan servicers, industry watchers and consumers a look at the rulemaking process. The rule, which implements a part of Wall Street reform enacted three years ago, forces lenders to make sure loan applicants demonstrate a reasonable ability to repay. If they show that ability, it’s considered a “qualified mortgage.” The rule sets out standards for what’s measured.
The agency says it took into account the needs of both consumers and the mortgage industry in making the rule.
“Our rule should not unduly restrict lenders’ ability to make responsible loans,’” says Peter Carroll, assistant director of mortgage markets at CFPB. “Over time, we expect to see responsible lending practices flourish for all residential mortgage loans.”
Earlier this month, the CFPB issued a guide to aid the implementation of the new mortgage rules. Among the propositions, the agency plans to release plain-language written summaries and video guides for the new rules this summer. The CFPB added that the transition should not be overly jarring, as “the vast majority of loans originated today will meet the standards for a qualified mortgage.”
The agency has not yet released a related rule under Wall Street reform, called the qualified residential mortgage (QRM) rule. While the QRM attempts to qualify loans as acceptable for sale to Fannie Mae and Freddie Mac, some of the standards applied to consumers could overlap. That rule should be released shortly.
For more info on QM
• Implementation strategy
• Ability to pay explained
• Overview of regulations