A recent survey by the American Bankers Association revealed that 42 percent of bankers expect that more than 80 percent of their mortgages would qualify as a “qualified mortgage” — or QM — under the CFPB’s new rule.
The survey also found that 17 percent of bankers expect between 66 percent and 80 percent of their mortgages to meet QM standards, while 13 percent of bankers estimate that between 50 percent and 65 percent of their mortgage production would meet QM standards. Twenty-seven percent of bankers indicated that less than 50 percent of their mortgages would meet QM standards, according to DeadlineNews.com.
The QM, or “Ability to Repay” rule, which was mandated under the Dodd-Frank Act, establishes qualifying standards for applicants seeking mortgage loans. QM loans contain a provision that would protect lenders’ from lawsuits filed by borrowers in cases of foreclosure on QMs.
Lenders will also enjoy safe harbor protection if they refinance borrowers from an adjustable rate mortgage, negative amortization loan or other high-risk mortgage product into a standard mortgage with fixed rates for five years if the new loan allows the borrower to make lower monthly payments. The Home Affordable Refinance Program is exempt from the rule.
The rule, which is set to take effect on January 10, also establishes a debt-to-income ratio of 43 percent, and rates on QM loans cannot exceed 150 basis points past benchmark rates.
Mortgage Bankers Association CEO David Stevens said that the DTI requirements on jumbo mortgages will only serve to make the loans harder to obtain.
“It will restrict credit on the margin over the current environment, and that’s something we cannot afford,” Stevens said, according to DeadlineNews.com.