HUD Starting Its Own QM Rule for FHA Loans
The qualified mortgage rule issued by the Consumer Financial Protection Bureau could be disruptive to the FHA single-family program, so the Department of Housing and Urban Development is starting the process of issuing its own QM rule.
Under the Dodd-Frank Act, the Federal Housing Administration has the authority to review the CFPB rule and issue a separate ability-to-repay rule for loans guaranteed by FHA, according to HUD spokesman Brian Sullivan.
“Now that the CFPB rule has been issued, we’re undertaking that process and will publish a proposed rule for comment in the near future,” Sullivan told NMN.
FHA lenders are already concerned about the CFPB QM rule because of certain changes to FHA mortgage insurance policies that will be going into effect soon.
On April 1, FHA will raise its annual premium by 10 basis points. On a standard FHA loan, new borrowers will pay a 135 basis point annual premium and a 175 basis point upfront fee.
In addition, FHA loans with LTVs above 90% will have a permanent annual premium. It will no longer be cancellable at 78% LTV.
These changes will increase the finance charge and a portion of FHA loans will not qualify for safe harbor status under the CFPB’s QM rule. As result, FHA lenders could face more litigation and have a chilling effect on FHA lending.
The Mortgage Bankers Association recently urged the consumer bureau to raise the average prime offer rate limit on QM loans to 2.5 percentage points for FHA loans so all FHA loans could qualify for the safe harbor. (The APOR limit for safe harbor QM loans is 1.5 percentage points in the final CFPB rule.)