The New Qualified Mortgage (QM) Requirements Negatively Affect Affiliate Settlement Service Providers
California Mortgage Finance NewsClinton R. Rockwell, Sherry-Maria Safchuk
After considering a proposed rule and numerous comments, on January 10, 2013, the CFPB issued its long-awaited Ability-to-Repay rule (Rule). Generally, the Rule sets forth strict underwriting standards that require a lender to obtain and verify information to support a consumer’s ability-to-repay. The Rule also defines qualified mortgages (QM), which are a subset of mortgages presumed to satisfy the ability-to-repay requirement. A mortgage will be deemed a QM, and thus entitled to a safe harbor, only if it satisfies certain product, underwriting, and points and fees requirements set forth in the Rule.
To be a QM, among other things, the points and fees payable in connection with the loan cannot exceed 3% of the total loan amount for loans over $100,000. Generally, real-estate related fees paid to third parties are not included in the points and fees calculation if the fee is bona fide and reasonable. Examples of real-estate related fees include title examination fees, title insurance fees, fees for preparing loan-related documents, notary fees, credit report fees, and property appraisal fees.
Originally published in the Spring 2013 issue of California Mortgage Finance News; reprinted with permission.