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QM Clarifications Issued

Mortgage News

Proposed clarifications have been issued for the Ability to Repay/Qualified Mortgage rule as well as the mortgage servicing rule.

In January, the Consumer Financial Protection Bureau adopted the Ability to Repay rule, which goes into effect on Jan. 10, 2014.

But since that time, questions about qualified mortgages and servicing have arisen. So the CFPB has issued another proposal to address those questions.

The proposal was spelled out in a bulletin Monday from the CFPB.

Debt-to-income ratios for qualified mortgages are limited to 43 percent. The proposal provides clearer rules for determining DTI ratios and amends language relating to a borrower’s employment record and income as well as the treatment of Social Security and rental income. It also amends language about obtaining business credit reports and other issues relating to self-employed consumers.

The proposal also would confirm that government and conventional agency loans meeting eligibility requirements provided in a separate agreement between a lender and a housing finance agency can be QMs in addition to those that follow the general agency guidelines.

Loans that don’t satisfy agency procedural and technical requirements are not necessarily excluded from QM status, according to the proposal. In addition, just because a repurchase or indemnification is required on a loan doesn’t mean that the loan is not a QM. Such standing would be determined by the specific facts and circumstances of each loan.

The CFPB said it is proposing the addition of a comment to Regulation X to emphasize that Reg X, which implements the Real Estate Settlement Procedures Act, does not preempt the field of possible mortgage servicing regulation by states.

Proposed changes would clarify which loans to consider in determining when a servicer qualifies as small in order to be exempted from the servicing rules issued in January. Loans serviced on a charitable basis will not be included.

“The changes would also provide several additional examples to illustrate application of the exemption to relationships between servicer and affiliate and between master servicer and sub-servicer, among others,” the bulletin stated.

The new proposal will soon be published in the Federal Register, at which point it will be open for comment for another 30 days.

The regulator said it plans to issue in June additional proposed clarifications about the servicing rules discussed in today’s bulletin and the 2013 Loan Originator Final Rule.

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