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The Dodd-Frank Qualified Mortgage what you need to know!

The Dodd-Frank Qualified Mortgage or QM, as it is know is likely to shape the future of home financing in years to come. The main premise is the “ability to repay” anti-predatory lending provisions. The QM would be a loan that, on the face, would meet the ability to repay standards and have certain features associated with “Safe” lending.

Under the first provision would be available for a mortgage that meets the following requirements:

1. Does not include negative amortization, interest only payments or loan terms exceeding a traditional 30 year term.

2. Total points and fees that exceed 3 percent of the total loan amount

3. The income or assets of the borrower have been considered and verified

4. Underwriting will consider the max interstate rate for the first 5 years of the loan, and would use a payment schedule that fully amortizes the loan over the term. It would take account of any mortgage related obligations

5. The consumer’s employment status

6. The monthly payment of any simultaneous mortgage

7. The monthly date to income obligations

8. The consumer’s credit history

The current risk-averse mortgage market, with litigation risks will most certainly cause credit to tighten further. The concern is that some lenders attempting to avoid risk at all by only lending money to wealthier clients who can afford to make higher down payments and have pristine credit scores. People who need a mortgage are not likely to get it if this takes place. There needs to be a happy medium.

Nobody is for giving people risky loans. The subprime and risky no documentation loans have disappeared. Credit policies are already tight. The QM should allow for broad access to safe and affordable mortgage products for people across the socio-economic spectrum, one can not totally eliminate risk. The Consumer Financial Protection Bureau must be careful to assure that the QM rule wind up protecting consumers not by ensuring they have access to safe mortgages but rather ensuring they have no access to mortgages at all.

Information supplied by “The National Association of Realtors “

Bill Sands , Sands & Company Real Estate,

www.PARealEstate