Hello, mortgage fans. The day is upon us.
On January 10, 2014 (that would be tomorrow), the government’s new Qualified Mortgage (QM) rules will go into effect.
Once they do, there is no turning back.
My friend Anthony Fontana wrote a long article about QMs back in September of 2013, so I urge you to read his article to get the full picture.
I’ll summarize the main points below and who the new QM rules will most likely affect.
Qualified Mortgage Overview
A Qualified Mortgage is a result of the Dodd-Frank Act passed in 2010. The QM rule essentially creates new categories of mortgages and imposes minimum underwriting standards for most home loans, which is referred to as the ability to repay requirement. To qualify for a QM loan, you must pass the points/fees test. It also removes exotic mortgages from the equation, meaning most lenders will not be offering no-documentation loans, interest-only loans, negative amortization loans or balloon mortgages since these types of loans cannot be QM loans.
The mortgage has to be 30 years or less, a fixed-rate or an adjustable rate mortgage and meet the points and fees test. What the points and fees test does is impose a maximum that lenders can charge clients for closing fees based on their loan amount. The new rules could potentially hurt jumbo loans, as well as loan amounts of $150,000 and lower. Even with the tiered points and fees test for lower loan amounts, more loans may not pass the test and therefore more clients may potentially not be able to qualify.
There’s your summary. Please, like I said, read the full post on Qualified Mortgages, featuring Shawn Krause, Quicken Loans Executive Vice President of Government Relations and Amy Bishop, Quicken Loans Deputy Corporate Counsel. These two know their stuff. No joke.
That’s it. Look out for tomorrow. QM is coming to a mortgage lender near you.