The new limit on upfront 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 the Consumer Financial Protection Bureau final [QM] rule,” HUD said Monday.
The comment period on HUD’s QM proposal ends Oct. 30.
The proposed rule for FHA-insured loans establishes two legal categories of qualified mortgage loans based on the annual percentage rate and the average prime offer rate of the loans.
Qualified mortgage loans with an APR equal to less than the average prime offer rate plus 115 basis points and the annual mortgage insurance premium will be afforded a legal “safe harbor” status that in most cases will shield the lender from lawsuits by defaulted borrowers.
FHA loans with a higher interest rate will fall into the “rebuttable presumption” category, which provides lenders with less legal certainty.
“Legally, lenders that offer these loans are presumed to have determined that the borrower met the ability to repay standard” of the QM rule, HUD said. “Consumers can challenge that presumption, however, by proving that they did not, in fact, have sufficient income to pay the mortgage and other living expenses.”
Meanwhile, with the qualified mortgage deadline fast approaching in January some vendors are starting to roll out automation to address it now even though it is in some respects still in flux.
Interthinx vice president of compliance, Roger Fendelman, told this publication that his company is close to meeting its deadline to have QM functions rolled out 90 days ahead of the QM deadline on Oct. 10.
“We are just putting the finishing touches on it. It’s about ready to go,” he said. “What we’ve done is we’ve taken the QM rule and the new HOEPA changes and incorporated them into our new automated compliance solution.”
Ellie Mae Monday also said it plans a fall release of its technology that will address new ability-to-repay/qualified mortgage rules.
Both indicated there would be some flexibility in the systems to address changes that still may occur ahead of the deadline and user preferences.
“We knew there were going to be different flavors of QM and we can have different flavors of QM in it” so that users can make adjustments and changes whenever necessary, Fendelman said.