The ability to repay the Qualified Mortgage rule, with certain exclusions, demands lenders to make a valid, good faith identification of a consumer’s capacity to pay a residential mortgage loan and provides specific liability protections for residential mortgage loans that satisfy the rule’s conditions for Qualified Mortgages (QMs). If a QM loan is relatively expensive, a lender is supposedly protected from responsibilities under the rule. Still, if the QM loan is not relatively expensive, the lender is protected from the liabilities involved.
The existing rule establishes various categories of Qualified Mortgages, including both the general and temporary Qualified Mortgage. The CFPB issued proposals to amend these existing rules in amending the sunset date for a temporary qualified mortgage, the understanding and definition of a permanent qualified mortgage, and a new category of a qualified mortgage, which is to be a seasoned type.
The proposal to amend the sunset date of temporary qualified mortgages grants an extension to the sunset date for temporary qualified mortgages while ensuring that the sunset date would be equivalent to the particular date of the final amendments to the General Qualified mortgage loan. Under the proposal to amend the definition of generally qualified mortgages, the 43% DTI ratio limit would be removed and replaced with a limit based on the loan’s pricing. The lender is needed to ascertain the DTI ratio. Finally, a seasoned qualified mortgage proposal was then made. Any loan made by a lender would be qualified to be a seasoned qualified mortgage if the loan satisfies the requirements at the end of the seasoning duration. To read more on these three proposals, click here.
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