More than 20% of mortgage loans originated today wouldn’t meet the “Qualified Mortgage” threshold, according to a leading risk management firm.
The Consumer Financial Protection Bureau’s “Qualified Mortgage” rule, set to go into effect in January, states that a borrower’s total debt liability – including housing debt – shouldn’t exceed 43% of the borrower’s income. Mortgages that meet the QM rule come with some protections for the lender under the CFPB’s “Ability to Repay” regulations. But more than one in five mortgages issued today wouldn’t make the grade, according to a study released Oct. 17 by ComplianceEase.
In addition, more than half of those loans would have fees that exceed the CFPB’s 3% cap, and loans that exceeded the cap typically exceeded it by more than $1,500. The rest had APRs too high to meet the QM standard.
“Based on current guidelines, these loans also will not be eligible for purchase, insurance or guarantee by government-sponsored enterprises (GSEs) or government agencies,” ComplianceEase said in a statement.
“Moreover, due to lack of marketability, lenders generally try to avoid originating loans known as ‘high-cost’ loans, which are subject to restrictions in the Home Ownership and Equity Protection Act (HOEPA). With new, stricter points and fees thresholds in the amended HOEPA, close to three percent of loans in the study that previously weren't HOEPA loans would move into the federal ‘high-cost’ category.”