QM Rule Might Make Life Hard for Affiliated Service Providers

Mortgage companies that own title companies are worried that the qualified mortgage rule the Consumer Financial Protection Bureau is slated to unveil Thursday will penalize the use of affiliated service providers.

The Dodd-Frank Act contains a 3% points and fee cap on what lenders can charge in making a QM loan. Industry groups are concerned the bureau will require lenders to include fees charged by affiliated companies in the 3% points and fee cap.

However, lenders that use nonaffiliated or independent title companies will not have to include the independent service provider’s fees in the 3% cap.

Many firms offer multiple services through affiliates so the closing and settlement process is conducted quickly and efficiently for the homebuyer.

But consumer groups are concerned that lenders will use affiliated companies to jack up prices unless restrained by the points and fee cap. In this case, it appears CFPB officials have sided with the consumer groups.

In other respects, the QM rule that will set underwriting standards for the mortgage industry seems to be reasonable.

There are reports that loans approved by Fannie Mae, Freddie Mac and Federal Housing Administration automated underwriting systems will meet the QM standards and enjoy a safe harbor from litigation in cases where the borrower defaults.

That QM provision will ensure that the origination of most government-guaranteed loans being made today will not be disrupted by the new rule.