The Department of Housing and Urban Development is reviewing the qualified mortgage rule and it may modify the safe harbor provision for Federal Housing Administration-insured loans.
The QM ability to repay rule issued by the Consumer Financial Protection Bureau provides a legal safe harbor for QM loans when the interest rate doesn’t exceed the average prime offer rate by more than 150 basis points.
Once the 150 basis point line is crossed, the lender is more vulnerable to litigation when borrowers default.
“We are assessing what the appropriate safe harbor line is for the FHA QM rule. And we are aware of the potential impacts of higher mortgage insurance premiums and the 3% points and fees test,” a HUD official said in response to an inquiry.
In terms of the 150 bps, “we need to get that pricing right in order to ensure broad enough access to FHA,” HUD secretary Shaun Donovan told members of the Mortgage Bankers Association at their annual Washington meeting. “That is the primary issue we are looking at,” he added.
A few months ago,
