Posted tagged ‘QM’

Execs from Lending Community Hash Out QM Questions

November 16, 2013

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These guys seem to have hit it on the head when it comes to the new QM rules. For a more detailed look at this subject – please read the article below.

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When it comes to next year’s regulatory obstacles, CEOs and senior executives from the mortgage industry’s biggest players agree on one thing: Education will be key to keeping business going smoothly.

In a panel at the 2013 Realtors Conference and Expo, high-level names from Quicken Loans, Wells Fargo Home Mortgage, JPMorgan Chase, and Bank of America discussed the qualified mortgage (QM) guidelines, which go into effect in January 2014. While the initial implementation of these rules is expected to restrict lending to some buyers in the short-term, panelists agreed that business should even out over time.

Because the QM rule lays out specific criteria for accepted loans, it’s going to be more important than ever for lenders to retain significant documentation to back up their underwriting decisions—something that professionals and consumers alike need to keep in mind, says Matt Vernon, home loan sales executive for BofA.

“It’s important for Realtors to be educated about the new documentation requirements so they can work with buyers and meet lender expectations,” Vernon said.

With a shortage of home inventory lifting competition in markets across the United States, one of the biggest concerns is the impact that more stringent standards will have on approval timelines. While timelines can vary depending on many factors, Vernon says the process is quicker and smoother when borrowers are educated about their lender’s application requirements.

Bill Emerson, CEO of Quicken Loans, agreed: “Our mission is to get someone approved. With clarity and transparency, buyers will know exactly what is needed of them. We want to do this in a manner that is as stress free as possible for consumers and Realtors.”

To read the complete article – please use the link below.

QM Questions

Report: Market Will Prosper Under Ability-to-Repay, QM Rules

October 30, 2013

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The less involvement in private business the Government has the better. That being said this rule just seems like common sense. As long as the requirements for loan approval are not out of line, and these seem to be basically OK, then they should not hurt the housing market in the long run. For a more detailed look at this subject please read the article below.

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Today’s resilient capital market has the capacity to adapt readily to the pending Ability-to-Repay and Qualified Mortgage (QM) rules set to take effect January 10, 2014, according to a white paper CoreLogic released Friday.

The paper titled, ATR/QM Standards: Foundation for a Sound Housing Market, provides an overview of the rules themselves and examines their possible impact on the market.

The Ability-to-Repay rule requires lenders to take eight borrower attributes into consideration: “borrower’s current income or assets; current employment; the monthly payment for the loan, as well as any other loans secured by the same property; monthly payments for property taxes and insurance for which the borrower is responsible; current debt obligations; the borrower’s monthly debt-to-income ratio or residual income; and credit history,” CoreLogic explained.

A “Qualified Mortgage” meets a set of standards that provide “safe harbor” for lenders. These mortgages are automatically considered to be compliant with the Ability-to-Repay rule.
“To be QM-eligible, a loan has limits on points and fees to be paid, as well as underwriting features allowed,” CoreLogic stated.

For the first seven years under the new regulations, loans that meet the purchase requirements for the GSEs, or the underwriting standards for the Federal Housing Administration, the Veterans Administration, or the U.S. Department of Agriculture, “fall into a temporary exemption and are considered QM as long as the loan provides for no interest-only payments, has a term that does not exceed 30 years, and meets the QM limitations on points and fees,” CoreLogic stated in its white paper.

To read the complete article please use the link below.

Ability-to-Repay

Regulators See No Fair Lending Risk in QM

October 24, 2013

green-lightThis is a good move by these 5 agencies. It would be nice if we had more of this from the bureaucracies. For a more detailed look at this subject please read the article below.

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Five federal agencies issued a statement Tuesday assuring creditors that they do not run the risk of being found in violation of fair lending laws should they choose to only originate “qualified mortgages” (QM) as defined earlier in the year.

The Consumer Financial Protection Bureau (CFPB), one of the five issuers of Tuesday’s release, handed down in January a number of guidelines for lenders to follow in order for their loans to be classified as QM (and thus “safe” should legal action arise). A major provision of those guidelines is the Ability-to-Repay (ATR) rule, which requires creditors “to make a reasonable, good faith determination that a consumer has the ability to repay a mortgage loan before extending the consumer credit.”

In response to CFPB’s rulemaking, some bankers have indicated they might limit their offerings to only QM products as the transition is made—and many are concerned as a result that their operations may run counter to the guidelines outlined in the Equal Credit and Opportunity Act (ECOA), implemented by the Federal Reserve’s Regulation B.

However, those fears are unfounded, regulators say.

“In the agencies’ view, the requirements of the Ability-to-Repay rule and ECOA are compatible. ECOA and Regulation B promote creditors acting on the basis of their legitimate business needs,” the interagency release reads. “Viewed in this context, and for the reasons described below, the agencies do not anticipate that a creditor’s decision to offer only Qualified Mortgages would, absent other factors, elevate a supervised institution’s fair lending risk.”

To read the complete article please use the link below.

No Fair Lending Risk

One-Fifth of Today’s Mortgage Loans Don’t Meet QM Standards

October 22, 2013

rejectedAre the new regulations going to be good or bad for the housing industry? On one hand it will keep the consumer from pay higher fees but on the other hand it will probably keep some buyers from being able to purchase a home. For a more detailed look at this subject please read the article below.

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One in five loans originated in today’s mortgage market will not meet the requirements of the Consumer Financial Protection Bureau’s (CFPB) Qualified Mortgage (QM) rule that goes into effect in January, according to California-based ComplianceEase.

ComplianceEase reviewed the loans audited through its ComplianceAnalyzer, a loan auditing software, to determine what percentage of current loans would meet the new QM criteria.

Of the 20 percent of loans that would not qualify, ComplianceEase determined fee levels would be the disqualifier for about half. The QM rule allows for points and fees of up to 3 percent.

Loans that exceed the 3 percent maximum typically do so by about $1,500, according to ComplianceEase.

The other source of loan disqualification is annual percentage rates (APRs) that exceed what is allowed through the QM rule, according to the company.

Fannie Mae and Freddie Mac will not guarantee loans that do not meet QM standards in the new year.

“Moreover, due to lack of marketability, lenders generally try to avoid originating loans known as ‘high-cost’ loans, which are subject to restrictions in the Home Ownership and Equity Protection Act (HOEPA),” ComlianceEase stated.

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Loans Don’t Meet QM Standards

Industry, Congress Urge DeMarco Not to Lower Loan Limits

October 14, 2013

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A minor change in the loan limits of $17,000.00 does not make much sense. It would hurt some borrows without making much difference in the exposure that the lender undertakes. For a more detailed look at this subject please read the article below.

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Federal Housing Finance Agency Acting Director Edward DeMarco is deliberating lowering the loan limits for Fannie Mae and Freddie Mac. Congress and the industry, however, are voicing a singular opposition, claiming such action would be detrimental to the housing recovery that is starting to take place across the country.

Members of Congress and several industry groups have sent letters to DeMarco over the past week urging him not to lower the GSEs’ conforming loan limits.

“Lowering loan limits further restricts liquidity and makes mortgages more expensive for households nationwide,” stated the National Association of Federal Credit Unions (NAFCU) in a letter signed by several other industry groups.

The association pointed out that many Americans still struggle to gain access to credit, and in the past year most conforming loans went to borrowers with credit scores ranging between 760 and 770.

The Mortgage Bankers Association (MBA) expressed similar concern in a letter it sent October 4, saying, “Any reduction in loan limits would have significant impact on thousands of families caught between the current limits and new, lower limits.”

On the other hand, reducing the loan limit would “significantly increase demand for private capital,” according to Fitch Ratings. However, the agency admitted “it is not clear how much impact this would have on the nascent recovery in the housing market.”

To read the complete article please use the link below.

Loan Limits

HUD Proposes New Definition of Qualified Mortgage

October 2, 2013

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If this is the new definition of what a Qualified Mortgage is, what was the old one? There also seems to be no reference to the borrower having any ability to repay the loan. Please read the article below.

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HUD proposed a new definition of “qualified mortgage” (QM) in a statement released Monday. To meet the new QM requirements, a mortgage will have to require periodic payments, have terms not exceeding 30 years, limit upfront points and fees to no more than three percent with adjustments to facilitate smaller loans, and be insured or guaranteed by FHA or HUD.

The Dodd–Frank Act required HUD to propose a QM definition that is aligned with the ability-to-repay criteria set out in the Truth-in-Lending Act (TILA) as well as the department’s historic mission to promote affordable mortgage financing options for qualified lower income borrowers.

“The new limit on upfront points and fees for all Title II FHA-insured single family mortgages 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 said in a statement. “Currently, HUD does not insure, guarantee or administer mortgages with risky features such as loans with excessively long terms (greater than 30 years), interest-only payments, or negative-amortization payments where the principal amount increases. Moreover, HUD’s existing underwriting standards require lenders to assess a borrower’s ability to repay their mortgage debt.”

The proposed rule establishes two categories of QMs that have different protective features for consumers and different legal consequences for lenders. HUD’s proposed Qualified Mortgage categories are determined by the relation of the Annual Percentage Rate (APR) of the loan to the Average Prime Offer Rate (APOR).

To read the complete article please use the link below.

Definition of Qualified Mortgage

OCC Says Multi-Dimensional Risk Management Imperative for Industry

September 14, 2013

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In this article, written by Krista Franks Brock, points out the need for a diligent effort to regulate the mortgage industry both from within and without. This is the only way to ensure that the mortgage business doesn’t fall back into the old practices that caused widespread mayhem in the past. Please read the article below and let me know what you think.

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Speaking at an industry conference in Phoenix, Arizona, Wednesday, Darrin Benhart, deputy comptroller for credit and market risk with the Office of the Comptroller of the Currency (OCC), said the changing regulatory environment requires mortgage lenders to consider a number of potential risks on different fronts.

“As you well know, the list of mortgage-related reforms is extensive,” Benhart said, naming the qualified mortgage (QM) and qualified residential mortgage (QRM) among them. “These reforms mean you will need an even greater emphasis on risk management techniques that not only look at credit risk but also encompass operational and compliance risk,” he said.

While in the past, various aspects of risk were often considered and managed individually, Benhart says going forward, it is important for all risks to be monitored in a holistic manner.

“Risk management groups today need to be multi-dimensional, and banks need a culture that promotes risk identification across business lines,” he said.

Benhart says home equity lines of credit (HELOCs) and collateral valuations are two key areas his office will be watching in the coming year.

To see the complete article – please use the link below.

Risk Management Imperative for Industry