CFPB's new Qualified Mortgage rules to take effect in January

The Consumer Financial Protection Bureau (CFPB) is tasked with regulating lender behavior. As the agency's mission statement says, its mission is to "make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products."

One particular focus of the CFPB has been mortgage lending practices. One of its most recent actions has been to rewrite the rules that define a Qualified Mortgage, which are those that are safe for borrowers. Using loan management software or whatever other risk assessment tools they deem necessary, lenders are required to gather pertinent financial information about borrowers. Lenders must also track mortgages through identification numbers.

In addition, a Qualified Mortgage cannot have any "toxic" features, which means it must meet the following standards:

  • Fully amortized with a 30-year term
  • Points and fees cannot exceed 3 percent of loan amount
  • Borrower's ability to repay the loan much be documented
  • Borrower's debt-to-income ratio cannot exceed 43 percent

Earlier this month, the New York Times noted that most borrowers (95 percent of current mortgages), with the exception of those at either end of the income spectrum, will not notice a change once the new Qualified Mortgage rules take effect.

"For a borrower going in January to get a loan, I think it's going to be pretty much status quo," Eric Stein, a senior vice president of the Center for Responsible Lending, told the Times. "The kind of loans that people are getting these days qualify directly for Q.M. status, so there shouldn't be any impact."

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