The Department of Veterans Affairs is working on a qualified mortgage rule to prevent any disruption to the VA home loan guarantee program.
VA home loan director Michael Frueh noted in an interview Tuesday that it has to issue a QM rule before a January deadline or else VA lenders will have to comply with the
“We consider our loans to be highly qualified mortgages,” Frueh said. And he expects the VA qualified mortgage rule will follow VA’s current underwriting guidelines for the most part.
“We basically believe that our underwriting standards as they stand should qualify a mortgage for the QM standard,” the VA director said.
He stressed that the VA program has low delinquency and foreclosure rates (close to the performance of prime loans) despite VA’s riskier profile. Nearly 90% of veterans and servicemembers don’t make a downpayment on a VA loan and most have low credit scores.
“We prevent foreclosures much better than anyone,” the VA director said.
The foreclosure rate on VA loans was 0.47 basis points and the percentage of VA loans 90 days or more past due was 2.18% in the second quarter, according to the Mortgage Bankers Association. On prime loans, the foreclosure rate and the 90-day or more past due rate was 39 basis points and 1.42%, respectively.
“We are publishing a rule that will delineate what we consider a qualified mortgage from VA’s prospective,” Frueh said.
HUD has been working on a QM rule for FHA-insured loans for some time. But it remains unclear when HUD will issue its QM rule for public comment.
