There are MANY questions about the new rules going into affect Jan 10th. QM specifically refers to Qualified Mortgages. The new laws require banks AND brokers to ensure that clients can repay their loans. Here is some information we hope you find helpful…
Fiction: The points and fees cap is going to put mortgage brokers out of business.
NOT TRUE…the new laws make it illegal for brokers to charge more than 3% in total lender fees. What this equates too for example is a broker or lender changing you $6,000 in their fees on a $200,000 loan. That is a LOT in fees and it is highly unusual for a lender to charge that much so this rule wouldn’t affect most transactions. I would guess most originators that work on volume are making 1-1.25% on average. Well below the 3% rule.
Fact: The Ability-to-Repay Rule does not cap all points and fees. Loans that are not Qualified Mortgages have no restrictions on the total amount of points and fees.
From a friend of mine: “If a loan is a Qualified Mortgage, it cannot include upfront points and fees greater than 3 percent of the total loan amount. Excessive upfront fees can encourage a “take the money and run” business model, where lenders do not have a big financial incentive to evaluate the riskiness of the loan because they make most of their money at the closing table.
The 3 percent cap on Qualified Mortgage fees is a reasonable limit that protects consumers and gives lenders the incentive to evaluate affordability over the life of the loan. The rule also makes allowances for smaller mortgages to ensure that responsible loans are not unintentionally affected.”
The CFPB (the govt agency enforcing these rules) is looking for things like ARM’s, interest only loans, and loans that are over 30 years in length…these will either be disallowed or scrutinized.
As always call your lender with ANY questions!
Max A Kallos
cell 678-298-8947 e-fax
Recognized in 'Atlanta' Magazine as a Five Star Mortgage Professional
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