2014- Qualified Mortgage

2014 Qualified MortgageThis year (January 2014) the Qualified Mortgage (QM) and Ability to Repay (ATR) rules have been adopted under the Dodd-Frank Act. A Qualified Mortgage (QM) is generally a mortgage that cannot include certain product features and that must be underwritten in accordance with specific underwriting Ability to Repay (ATR) guideline standards. The QM requirements are designed to minimize the risk of non-payment by the consumer. Properly originating a QM loan satisfies the ATR standard and provides liability protection to the creditor. The specific requirements differ depending on the type of QM the creditor originates.

While this sounds scary, be assured that most lenders have been underwriting this way for some time now. First let’s discuss how business is “as usual”.

There is “Temporary QM”

There is a Temporary QM Option that lenders are permitted to follow. When the loan program chosen is eligible for purchase or guarantee by (GSE’s) Fannie Mae (FNMA) or Freddie Mac (FHLMC) or is eligible for insurance by the HUD, or is eligible to be guaranteed by VA or USDA, then the underwriter must follow the Desktop Underwriter (DU) or Loan Prospector (LP) automated loan findings to determine the debt-to-income ratio.  Thes temporary QM Option expires on the earliest of:

  1. the date that the GSE’s exit federal conservator ship or receivership or
  2. January 1, 2021

Therefore, for now, this means business as usual for those clients that may need to exceed the QM 43% debt-to-income ratios rule. The file must be properly documented to ensure that it matches the DU or LP findings. If the findings from DU or LP do not pass and a “refer” is obtained, then the QM Requirements as outlined below must be followed.

The Typical QM Requirements when not a GSE loan (or a DU/LP Refer Finding):

  • The loan must provide for regular, periodic payments that are substantially equal. (except for the effect that an interest rate change may be for an Adjustable Rate Mortgage.)
  • The loan must exclude negative amortization, interest-only payments and balloon payment features.
  • The loan term must not exceed 30 years.
  • Overall Debt to income ratios not to exceed 43%.

General QM Underwriting

The QM loan must be underwritten taking into account the monthly payment for the mortgage-related obligation, based upon a fully amortizing schedule using the maximum rate permitted during the first 5 years after the date of the first periodic payment.

  • At a minimum, underwriters must consider and verify consumer’s income, assets, current debt obligations, alimony and child support obligations.
  • Underwriters must determine that the consumer’s total monthly debt-to-income (DTI) ratio does not exceed 43%.

Good solid underwriting is now the “official” way of granting home loans.  Consumers do need to be aware that financial documents will be required to document income and assets.  Basics documents required are:

*Two years of Federal Tax Returns with all schedules, along with W2’s or 1099’s.
*One month of recent paystubs for each borrower if they are working.
*Two months of bank statements with non-electronic deposits being sourced.  (Sourced= a copy of the check that was deposited.)

Your loan officer will guide you and your list will be longer due to your unique situation.  Please remember…your loan officer is there to guide you to success so when your loan is submitted for Final Review…you come out with the underwriting approval that allows your loan file to move straight to document preparation.

 

Karen Jones Banner with Disclosure

AmeriFirst Financial, Inc., 1550 E. McKellips Road, Suite 117, Mesa, AZ 85203 (NMLS # 145368). 1­877­276­1974. Copyright 2017. All Rights Reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without prior notice. All products are subject to credit and property approval. Not all products are available in all states or for all loan amounts. Other restrictions and limitations apply. AZ: Arizona Mortgage Banker License No. BK0013635; CA: Licensed by The Department of Business Oversight under the California Residential Mortgage Lending Act; CO: Regulated by the Division of Real Estate; WA: Washington Consumer Loan Company License No. CL­145368. AmeriFirst Financial, Inc. is an independent mortgage lender and is not affiliated with the Department of Housing and Urban Development (HUD) or the Federal Housing Administration (FHA). Karen Jones is a licensed loan originator at AmeriFirst Financial.,Inc. Karen Jones complies with all regulations and rules of all government agencies and regulators including the Real Estate Settlement and Procedures Act. The services provided by Karen Jones are not a condition, nor do they create any obligation for any form of remuneration for any real estate settlement service related to any referral.

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