Mortgage Blog

The Qualified Mortgage (QM) rule going into effect on
January 2014 will radically change the mortgage lending
environment. In fact, a recent analysis of home loans
showed that 1 in 5 current mortgages would not qualify
under the new rule. To comply and be able to sell mortgages
on the secondary market to Fannie Mae and Freddie Mac,
lenders won’t be able to offer interest-only loans,
negative-amortizing loans, loans longer than 30 years
or balloon loans, or charge the borrower more than 3%
of the mortgage amount in fees.

Lenders must also adhere to the Ability-to-Repay rule,
which says borrowers' total debt liability -- including
housing -- should not exceed 43 percent of income.
According to the Consumer Financial Protection Bureau,
lenders must "make a reasonable, good faith determination
of a consumer's ability to repay any consumer credit
transaction secured by a dwelling." Lenders who issue
mortgages that meet the QM criteria have safe harbor,
meaning they cannot be sued by borrowers claiming the
loan terms are unfair.