One-fifth of mortgages wouldn't meet QM standard

by Ryan Smith24 Oct 2013

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.”


  • by Bruce | 10/24/2013 7:08:46 AM

    I wonder if we, and the customer, would have been better off without all the government involvement. When the mortgage mess started it seem as though the market started correcting itself. If it wasn't for an election year when the mess started we may not have had so many polititions involved. Just my 2 cents.

  • by Brian | 10/24/2013 8:22:03 AM

    When it wrote the Rules, CFPB used the current rate enviroment as the Base Rate. You will often hear them excluding items included into the interest rate, like the consumer isn't paying for that, but as interest rates rise the SRP Credits will diminish from the 5% average to below2%. Since LLPA are included in the 3% if paid directly by the borrower the non bank community will have issues. Compile this with diminished banks originating mortgages and the consumer is going to be places at a disadvantage


Is TILA-RESPA a good or bad thing long term?