CFPB Takes Seller Points Out of QM

Just in time for higher mortgage rates, the Consumer Financial Protection Bureau has ruled that seller points can be excluded from the 3% points and fees test in the qualified mortgage rule.

This change proposed and finalized by the CFPB could be a boon for homebuilders if rates go higher and they want to buy down the mortgage rate to sell their inventory.

Ballard Spahr attorney Richard Andreano said seller points are excluded from the finance charge and the CFPB just amended its QM commentary to exclude seller points from its definition of points and fees.

He stressed that there is a specific definition for seller points. It is not something that a home seller pays the borrower to cover closing costs—that is still included in points and fees.

It involves points that the creditor imposes on the seller. “You have to be careful that it is a real seller's point and qualifies for an exclusion,” Andreano said. “You got to make sure you do it right,” he added.

Another change to the QM rule will facilitate no-cost loan programs, according to the Ballard Spahr partner.

The CFPB decided lender-paid items on behalf of the borrower should not be included in points and fees, except for compensation to the mortgage broker.