The Qualified Mortgage (QM) rule going into effect on January 2014 will radically change the mortgage lending environment. In fact, a recent analysis of home loans showed that 1 in 5 current mortgages would not qualify under the new rule. To comply and be able to sell mortgages on the secondary market to Fannie Mae and Freddie Mac, lenders won’t be able to offer interest-only loans, negative-amortizing loans, loans longer than 30 years or balloon loans, or charge the borrower more than 3% of the mortgage amount in fees.
Lenders must also adhere to the Ability-to-Repay rule, which says borrowers' total debt liability -- including housing -- should not exceed 43 percent of income. According to the Consumer Financial Protection Bureau, lenders must "make a reasonable, good faith determination of a consumer's ability to repay any consumer credit transaction secured by a dwelling." Lenders who issue mortgages that meet the QM criteria have safe harbor, meaning they cannot be sued by borrowers claiming the loan terms are unfair.
Clearly the new rules mean that banks need strict controls in place--particularly to document the borrowers’ ability to pay. That’s where automation of Prefunding Quality Assurance (QA) and Post-Closing Quality Control (QC) Services come into play. With this in mind, Visionet is bringing its QA/QC technology product--currently used by some large banks--to the mid-tier as a pay-as-you-go service. Mid-tier banks don’t need to install systems or hire anyone; they just need to supply the data, choose the reports they want, and Visionet will deliver the results.
Elements of the Automated Service include:
- Match data from the loan origination system (LOS) to the customer’s collateral
- Identify missing documents through optical character recognition (OCR)
- Compliance checks such as GFE variations and HUD burn calculations
- Customized checklists and reports for each lender
- 100% visibility into the process--tests, results, feedback, etc.
- Forensic analysis to ensure all bank policies and procedures are being followed and quality is consistent
- Interoperability with other systems and third-party tools
Register for this complimentary webinar today and learn how your organization can leverage our technology and know-how to approve consistently high-quality, high margin loans that meet the new QM rules.