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QM problems already starting, claims mortgage pro

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Mortgage Professional America | 08 Jan 2014, 06:08 AM Agree 0
The Consumer Financial Protection Bureau’s new mortgage rules don’t take effect until the end of the week, but they’re already causing trouble, one mortgage industry head
  • Jeff | | 08 Jan 2014, 08:12 AM Agree 0
    I agree totally this will have a very big impact on lending
  • being human | | 08 Jan 2014, 08:14 AM Agree 0
    What an idiot. the mortgage was turned down because the originator probably had the highest amount of points he could charge since the mortgage was only 50,000. there should be a rule that states the lender has to reduce all origination fees to bring the mortgage to 43%.
  • 2bsquare | | 08 Jan 2014, 08:15 AM Agree 0
    Seeing the same thing. Have a borrower with a 46.4 DTI on a conforming refi. She has 1.2M in savings.

    In 25 year I have never seen two mortgages that are identical. All borrowers have different needs and goals. The Gov needs to recognize that and modify its position of trying to save one person at the expense of millions.
  • Mike | | 08 Jan 2014, 08:19 AM Agree 0
    I'm confused. Are you saying the mortgage didn't pass DU? According to the rule, any mortgage underwritten for delivery to a GSE or government does not have the 43% DTI restriction. It is considered a "Temporary QM" and as long as it isn't HPML or HOEPA it will enjoy a Safe Harbor Protection.
  • John | | 08 Jan 2014, 08:19 AM Agree 0
    QM is all about FNMA only purchaseing mortgages that fit a very tight mold. QM will force wallstreet and the banks to come up with pruducts where "they" want to take the risk not FNMA /taxpayer (QM is another step "toward no mre bailouts")
  • Mortgage Lady | | 08 Jan 2014, 08:21 AM Agree 0
    @Being Human, so the lender should do the mortgage for free? The lender makes NO money unless the mortgage closes, so turning that kind of mortgage down would make NO sense. You don't know what points, rate, etc., the lender quoted the borrower, and I am guessing it truly was unworkable due to the new guidelines. I have a borrower I closed last month, who had a 44.3% debt ratio, putting 20% down and 787 score. 30 year fixed, no points, waived $2500 in costs. He would NOT have qualified had we done the mortgage this month regardless of what I had done.
  • Mark A Pickens | | 08 Jan 2014, 08:22 AM Agree 0
    It seems that every time the government tries to help the consumers, without being experts in the field, the consumers and the lenders all get hurt in the long run. Common sense tells us if you make it more expensive and more strict to get a mortgage, the more everybody gets hurt. Let professionals decide who qualifies for a mortgage, not buerocrats.
  • Common Sense | | 08 Jan 2014, 08:25 AM Agree 0
    Being human, what could you possibly be basing that comment on? Do you have any idea what you're talking about?
  • Corey | | 08 Jan 2014, 08:25 AM Agree 0
    to "being human", you shouldn't judge what you dont understand. points & fees are not considered in a mortgage decision by an AUS. nor are points & fees considered in a DTI.
  • Pete | | 08 Jan 2014, 08:28 AM Agree 0
    @Being Human, the debt ratio is a measure of the payment in relation to income, not closing cost or points. You really should read before you post.
  • NORAH | | 08 Jan 2014, 08:35 AM Agree 0
    This is exactly what happens when you have people that are absolutely out of touch with the reality making the rules. By pretending to help protect the consumer, they obtain an opposite effect: they hinder a lot of consurmers from being able to get a mortgage mortgage.
  • being human | | 08 Jan 2014, 08:36 AM Agree 0
    Yes, but rate is. And rate is part of the points. Just like the lady said up there. she did a mortgage with no points. so if she would hav e been up front with her fee,the rate would have been lower. did she say how much she made on the mortgage . sinse she could cut back 2500 to the borrower. I alway cut deals to borrowers that just refinanced within the last 6 months, where as I see the the originator could have given the rate that I had given but they were pigs. The best one was when an originator called the borrower begging him not to close until his 6 months were up. since the originator would have had to cut a check back to wellsfargo for 32,000.
  • Mortgage Lady | | 08 Jan 2014, 08:44 AM Agree 0
    @Mike, yes the mortgage DID pass AUS; however, effective Jan 10th, it would NOT (for conventional mortgages anyway). The point being, borrowers that qualify today may NOT qualify next week. If their debt ratio is "tight" (i.e., 42%, and maybe homeowners' insurance premium ends up being more than estimated, that small thing could be enough to throw them above the 43% maximum)
  • Jeff Sargent | | 08 Jan 2014, 08:45 AM Agree 0
    That is a prime example of why these rules should be revisited. When the government began the movement for sweeping changes back in '08, they weren't asking the right folks the proper questions to form valid opinions based on real life facts. Instead it has all been "knee jerk politicism" from the get go that ensued after the cracks began to appear on the facades that subsequently became our financial meltdown due to greed, unethical & immoral behavior by folks in high positions that have not been prosecuted nor held accountable for their misdeeds; they gained financially. Many of us that focused our educations and followed a career path in mortgage lending saw the writing on the wall and after the GFE, Dodd-Frank and Basel reforms began having negative impact simply said good day, good luck and applaud any and all that remained in the mortgage industry to pursue our own paths out of the manure created by the inept politicians and others that brought this all on. It was apparent to many of us who were also economists that many of the factors that less up to the implosion began decades ago with the strokes of pens, which opened the floodgates for the chaos that we have found ourselves in for over half a decade. Look back to see which laws, regulations were changed and you will find the mechanisms that subsequently planted the seeds which were grown by the greedy folks that took advantage of us and you'll find that we now carry the financial burden which will be passed through the generations and you will not need to wonder what happened to the good old days. You will see that we were all taken advantage of and they have all made financial gains from their I'll begotten gains and only carefully thought out orchestrated mechanisms must be out in place to correct what has taken place, but that may be impossible with our present political situation of
    bipartisan one upsmanship we have. What happened to "By the people, for the people, in God we trust?"
    Best regards,
    Jeff Sargent
  • Mortgage Lady | | 08 Jan 2014, 08:46 AM Agree 0
    Temporary QM's are only applicable to FHA, USDA and VA mortgages, and some investors are not purchasing any 30 year FHA mortgages at ALL any more because they fall into the "HPML" category via the monthly MIP being carried throughout the entire 30 year term now, making the APR more than 1.5% above the APOR.
  • Mortgage Lady | | 08 Jan 2014, 08:48 AM Agree 0
    Being Human: we made VERY LITTLE on the mortgage I am referring to--cut it to the bare bones minimum in order for the borrower to be able to get into the house. We always give them the option of several rate, points, and closing costs structures. This particular borrower really didn't have many options. A finite amount of cash to bring to the table, and a tight debt ratio. We WANT the borrowers to buy houses and be happy, and come back to us for the next home purchase.
  • Bill | | 08 Jan 2014, 08:50 AM Agree 0
    Being Human you don't appear to have put any thought into your verdict. If she was at 47%, bringing her down to a 43% cap could never have been possible because of points or fees alone...that's a 4% drop man. You don't even know what debts made up the 47% total DTI and therefore how much the mortgage impact was on the number no matter what the LO quoted. This was a good example of what we will all be facing...more important to me in a case like this would have been knowing the resdual income, not the DTI. Right?
  • Corey | | 08 Jan 2014, 08:52 AM Agree 0
    @ being human...you are not a true mortgage professional and should leave this type of work to the professionals. it does not serve all borrower interest to "buy-down" a rate, nor does it serve all borrower interest to agree to a higher rate for lower closing costs. each case is different.
  • Rod | | 08 Jan 2014, 08:53 AM Agree 0
    Perhaps DTI isn't always the best indication of the ability to repay. I think the GSEs should consider residual income and assets more prominently in the analysis.
  • being human | | 08 Jan 2014, 08:54 AM Agree 0
    Mortgage Lady : So when that happens you should give the seller the option to donate money to a non profit so the non profit can gift the funds needed to get the deal done. Most sellers will do this just to sell their home
    . and most lenders are allowing this again.
  • larry | | 08 Jan 2014, 09:07 AM Agree 0
    Since the QM rule doesn't kick in until Jan 10, 2014, your Conv example client who was denied is not an appropriate sample of the pain QM is about to inflict. To be honest, the example doesn't sound legitimate to me. I have routinely received Approve/Eligible results from clients with less favorable qualifying characteristics.
  • Marcus | | 08 Jan 2014, 09:10 AM Agree 0
    AUS is and will approve mortgages over 43%. This is something many brokers are not understanding. The agencies are exempt. As long as the mortgage clears an agency's AUS then it is QM.

    The mortgage in the example was declined for another reason, and NOT the jump from 43% to 47%. In other words, the same mortgage would have been declined under ageny guidelines three moths ago.

    While it is also possible that this particular lender had an overlay which would not allow DTI over 43%, that is the lender's issue, and not the fault of the QM rule.

    There are plenty of reasons that the QM rule will cause problems. Giving examples like the one in the article dilutes our credibility when complaining to the CFPB.

  • Laurie | | 08 Jan 2014, 09:24 AM Agree 0
    Marcus is correct. But we could see investors tighten up what they are willing to accept and that remains to be seen. We won't know the impact of these rules completely until we work with them for a while.
  • Pagan Ranger | | 08 Jan 2014, 09:32 AM Agree 0
    @Being Human
    Sorry, but you do not seem to have a grasp on anything and every post you sound less and less credible.
  • Robert | | 08 Jan 2014, 09:45 AM Agree 0
    Generally we don't get too many DU approvals at DTI greater than 45%. Try running it thru LP and you will probably get an approval.
  • Mike | | 08 Jan 2014, 09:46 AM Agree 0
    @Mortgage Lady.
    Temporary QM also applies to Fannie and Freddie too. If a mortgage is underwritten with and accepted by FHA, VA, USDA, Fannie and Freddie, it is be default, a QM and will have a safe harbor. If it is HMPL, it will have a rebuttable presumtion. Regardless, the 43% DTI cap is waived for any of these mortgages. Now that's not to say that investors will have an appetite for them but if they don't, it is out of ignorance.
    @Marcus....exactly!
  • Please think... | | 08 Jan 2014, 10:54 AM Agree 0
    QM is an arbitrary definition and rule someone though up, no study, no testing. Surely a 26% DTI would be 'safer'.

    According to the MBA 8/2013,
    Total mortgage production expenses...increased to $5,818 per mortgage in the second quarter, from $5,779 in the first quarter.

    The CFPB say's; We'll let a brokerage company (banks are left alone) be compensated;
    3% if mortgage > $100K
    $3K if mortgage is $99,999 -$60K
    5% if mortgage is $59,999 - $20K
    8% if mortgage is $1 - $12,499

    Do the math then tell me who will be hurt by QM. This is not fair to consumers nor brokerages. Picking winners and losers is abuse.
  • OMG | | 08 Jan 2014, 11:35 AM Agree 0
    being human: you are absolutely driving me crazy... as previously stated you appear to know less and less each time you open your mouth.
  • Lee in CA | | 08 Jan 2014, 01:46 PM Agree 0
    Mr. Savitt is already showing his political savvy. With one breath he is announcing his candidacy for office and with the next breath he is putting "creating" a political spin out of thin air. His "example" has nothing to do with QM/ATR. Those of us that have been in this business for very long know that DU is a "black box" and the metrics used in its analysis of a borrower can't always be "defined". The fact that he has a "seeminly good" borrower that was declined by DU is not an indication of the impact of QM. That's like saying the ice cubes I found in front of my freezer are an indication that a cold front is headed our way. One has absolutely nothing to do with the other. Typical political obfuscation.
  • Unhappy with QM | | 08 Jan 2014, 01:49 PM Agree 0
    I agree completely with Jeff Sargent. In addition, we unfortunately, have no real lobby as an industry. At least not one that is being heard or anyone really cares about. The big banks are closing in on the biggest, legalized collusion of modern American financial history and no one in Washington is going to do anything about it. I am worried about us as brokers, but as a consumer, I am more concerned. This does nothing but steer more consumers to the banks where they have less and less options and choices.
  • MA broker | | 08 Jan 2014, 08:38 PM Agree 0
    One of my lenders (SPM) told me that due to QM they are not allowing any brokers to charge YSP less than 1.5% so I have to RAISE my YSP to be in compliance. Give me a break, I thought we are bums for charging too much. Now I have to charge less?
  • Ken Riedel | | 09 Jan 2014, 03:30 PM Agree 0
    Compensating factors and discretionary income can be hard concepts to grasp to a layperson. For someone making 3K/mo, even a 40% back end ratio wouldn't leave them with much for their groceries and utilities. But for someone making 30K/mo with healthy reserves, higher dti is no problem. Since most voters don't get this, they'll support the guy that talks tough on ratios.
  • Dan Smith | | 09 Jan 2014, 04:15 PM Agree 0
    Don't forget, that as the originator of the QM/Non-QM mortgage, your name and NMLS# are now part of the mortgage,Note and TIL. You will be named in any future lawsuits that might result from a mortgage gone bad? That will make you think twice about every deal you write and yes, some deals will not get done!
  • Stiltz | | 15 Jan 2014, 10:20 AM Agree 0
    being human - I agree with all other "true" professionals who have commented about your statements. You are not in the industry....and to reason with a "fake" as you is wasted time. Do your real job and stop acting as if you are an LO...you have no idea about the lending rules as they exist today as well as in the recent past! Stop your stupid comments and don't go away mad, just go away!
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