HUD rule out today on QM for FHA
Sept. 30, 2013 – All single-family loans insured by the Federal Housing Administration, with the exception of reverse mortgages, would be defined as “qualified mortgages” under a proposed rule scheduled for publication in today’s Federal Register.
The proposal, from the Department of Housing and Urban Development, also would implement CFPB’s points-and-fees structure for such mortgages.
HUD proposes to distinguish between a safe-harbor QM, or one that is deemed to meet the Truth in Lending Act’s ability-to-repay requirement, and rebuttable presumption QM as follows:
- A rebuttable presumption would apply to a single-family mortgage with an annual percentage rate that exceeds the average prime offer rate by more than the combined annual mortgage insurance premium plus 1.15 percentage points for a first-lien mortgage.
- A safe harbor would apply to a single-family mortgage with an APR that exceeds the APOR by less than the combined annual mortgage insurance premium plus 1.15 percentage points for a first-lien mortgage.
The proposal does not include the basic ability-to-repay underwriting requirements prescribed by CFPB, and it omits some of the elements of the CFPB QM definition. FHA already requires regular periodic payments, caps maturities at 30 years and prescribes specific underwriting requirements. However, the HUD proposal on QM does not include a debt-to-income component.
NAFCU will publish an online Regulatory Alert seeking its members’ input on the proposed rule.