The rule builds from the CFPB’s existing QM
rule, according to HUD. In order to satisfy HUD’s rule, a mortgage must:
- Have terms of no more than 30 years
- Require periodic payments with no risky features
- Limit upfront points and fees to no more than 3% (with adjustments to facilitate smaller loans and some exceptions)
- Be insured or guaranteed by HUD or the Federal Housing Administration
The new rule establishes two types of qualified mortgage: the “rebuttable presumption” qualified mortgage and the “safe harbor” qualified mortgage.
A rebuttable presumption qualified mortgage will have an annual percentage rate greater than the average prime offer rate +115 basis points plus the ongoing mortgage insurance premium rate. Lenders that offer rebuttable presumption qualified mortgages are presumed to have determined that the borrower has the ability to repay. However, borrowers can challenge that presumption by proving that they didn’t have sufficient income to pay their mortgage along with other living expenses.
A safe harbor qualified mortgage will have an APR equal to or less than the APOR plus 115 basis points and ongoing mortgage insurance premium. Lenders that offer these loans have greater legal certainty that they are meeting the Ability-to-Repay standard.
Read the final rule here
The Department of Housing and Urban Development on Wednesday released its final rule defining “qualified mortgages” that the agency insures, administers or guarantees. The rule will take effect Jan. 10.