Posted by Bear900/CA on 12/12/13 5:17pm
Msg #495932

What you should know about QM and ATR

QM = Qualified Mortgage (now law)
QRM =Qualified Residential Mortgage (this was not adopted)
ATR = Ability to Repay(now law)
3% Cap on fees (now law & discussed below)
Safe Harbor = provides safety from litigation for lenders who use QM

Do a search for QM and you will find some info I have been “slipping it in” for about a year now. I.E. Msg #453715

Why? There could have been a major effect on the industry and us! Originally, there were two models for this regulation: QM and QRM. One or the other had to take place by 01/10/14. QRM would have required 20-30% down and would have been a disaster.

Current prediction is that 20% of today’s loans will no longer qualify as QM. That will tempt some into fraudulent loans, again.

FHA, VA, USDA, and Fannie & Freddie loans already fit QM.

So what are the implications to our future business? They are slight but they add up.

1. Qualifying for ARMs will be more restrictive.

2. No more “higher priced”, interest only, balloons, or loans with prepay penalties.

3. Max 30 year amortization and no neg-ams (don’t exist anymore that I know of).

4. All loans must prove customer ability to repay even if it is not a QM loan. That is done now with 4506-T’s and VOE.

5. Fannie will cap at 95% LTV and retire their 97% LTV loans.

6. If origination points and fees are greater than 3%, FHA will not insure the loan as a QM.

7. Seller paid fees will be addressed by some sort of questionnaire like in the old days to determine if some are applied to lender origination fees (part of the 3% cap).

8. It’s been pretty much settle that the 3% cap will only include lender or broker origination fees, UW fees and affiliated company (20% owned by the lender) fees. The 3% cap on fees varies for loans under $100K.

9. 43% max DTI can be exceeded and still be a QM. The GSEs will accept greater then 43% with qualifying circumstances as they do now. These will be safe harbor loans.

10. All loans must prove ATR but not all loans require QM. QM provides the lender and LO Safe Harbor from customers who claim they were put into a loan they could not repay. QM is more of a lender call and they are already tight with their UW.

11. You will see the lender’s NMLS number and Name on the Note and DOT. Foreclosures will be tracked back to these to see if ATR existed.

12. ATR has a 3 year statute of limitations but the customer still has a claim at any year in defense of foreclosure.

13. There are subprime companies (some quite different than what we are used to) setting up to handle non-QM loans. The loans they generate will be 'safe' but outside the standards of QM. They don't want to buy back loans.

“Life will find a way”.

Reply by Marazz/AZ on 12/13/13 8:31am
Msg #495996

Thanks for all the good info. Although there will likely be some short term pain, I think this is all good in the long run.

I think one of the best things that will happen is that this will help shift the market back to collateral based loans. The root cause of the housing bubble was a shift from the traditional model of collateral based lending, to credit based lending (ie anyone who could fog a mirror could get a loan). So removing those iffy buyers will help stabilize things. Sorry if I'm offending anyone but some people should just be renters (at least at certain times in their lives).

The new subprime market that will crop up is also a good thing, IMHO, because those lenders will be forced to look more closely at WHAT they're lending on, as well as who. So there will still be opportunities for anyone to buy a house but perhaps you will start out in what used to be referred to as a "starter home" not a McMansion.