The Department of Housing and Urban Development has established a definition for qualified mortgages on government-insured loans. HUD made some exceptions on special loan programs.
A final rule published Wednesday indicates that HUD’s QM definition applies to single-family residential loans that it either insures, guarantees or administers.
HUD said that its QM definition aligns with the Ability-to-Repay rule as outlined in the Truth in Lending Act and the Consumer Financial Protection Bureau’s QM definition.
HUD originally proposed its QM rule in September.
“The Dodd-Frank act also charges HUD and three other federal agencies with prescribing regulations defining the types of loans that these federal agencies insure, guarantee, or administer, as may be applicable, that are qualified mortgages,” today’s notice said. “Through this rule, HUD complies with this statutory directive for the single family residential loans that HUD insures, guarantees, or administers.”
HUD said that the final rule makes no significant changes to its the QM core definition proposed in September.
However, in response to industry concern about immediate system changes that will be needed to comply with HUD regulations, HUD clarified that its definition of a safe harbor QM incorporates CFPB safe harbor QM requirements under the special provision for loans insured under the National Housing Act while allowing for a higher Annual Percentage Rate threshold — eliminating the need for immediate industry change.
“In other words, compared to the CFPB’s regulations, this rule allows more FHA mortgages to qualify as safe harbor qualified mortgages; every FHA loan that would have qualified as a safe harbor qualified mortgage under the CFPB regulations for loans insured under the National Housing Act would qualify as a safe harbor qualified mortgage under this HUD rule,” the final rule stated. “Since the lending industry must comply with CFPB’s regulations by January 2014, and were given a full year to prepare for compliance with the CFPB regulations, this clarification should ease concerns about additional immediate compliance costs and the need for additional time to comply with HUD’s qualified mortgage regulations.”
Around 19 percent of Title II loans are being reclassified from rebuttable presumption QMs under the CFPB regulations to safe harbor QMs under HUD’s regulation. Less than 1 percent of Title II loans would remain a rebuttable presumption, and 74 percent would qualify for QM status with a safe harbor presumption of compliance with the Ability-to-Repay requirements under both the CFPB’s rule and HUD’s rule.
Roughly 7 percent of Title II loans would continue not to qualify as QMs based on exceeding point and fee limits. HUD won’t insure these loans but expects that most will adapt to meet the points and fees in order to be insured.
Safe harbor status will be given to all Title I, Title II manufactured housing and Section 184 and Section 184A insured mortgages and guaranteed loans. HUD made this decision on these unique loans to maintain their availability for underserved borrowers and allow it additional time to further examine the programs.
QM rules go into effect on Jan. 10, 2014.
