At the beginning of this year, the Consumer Financial Protection Bureau issued a long-awaited “qualified mortgage” rule that required lenders in the broad single-family mortgage market to ensure borrowers had the ability to repay their loans. Today, the U.S. Department of Housing and Urban Development (HUD) released its own QM rule for the mortgages HUD insures, guarantees or administers, including those backed by the Federal Housing Administration.

HUD’s new rule is built off of the CFPB’s QM rule. In order to comply, mortgage loans must require periodic payments without risky features; cannot have terms that exceed 30 years; and must limit upfront points and fees to no more than 3 percent with adjustments to facilitate smaller loans (with some exceptions).

HUD said the first two elements of the rule are already part of its existing underwriting process, and that the limit on points and fees “is consistent with the private sector and conventional mortgages guaranteed by Fannie Mae and Freddie Mac to attain qualified mortgage status under CFPB’s final rule.”

HUD’s rule includes two types of qualified mortgages, each of which offers different protections for consumers and different liabilities for lenders. A “rebuttable presumption” QM assumes lenders have vetted the borrower’s ability to repay the loan, but that the borrower can challenge that presumption in court. A “safe harbor” QM allows borrowers to sue their lender only if they believe the loan does not meet the definition of a safe harbor qualified mortgage.

Both the CFPB’s and HUD’s QM rules are set to go into effect Jan. 10, 2014.

Source: HUD

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Success!
Thank you for subscribing to Morning Headlines.
Back to top
×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription