Escrow Trust Advisors | CFPB Releases Anticipated Qualified Mortgage Rule
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CFPB Releases Anticipated Qualified Mortgage Rule

CFPB Releases Anticipated Qualified Mortgage Rule

The Consumer Financial Protection Bureau’s (CFPB) recently unveiled their new qualified mortgage (QM) rule, which was created to protect both consumers and lenders. The Ability-to-Repay rule goes into effect in January 2014 and specifies that all new mortgages must comply with basic requirements that protect borrowers from taking loans they can’t repay.

Under the revised rules, all borrowers provide supporting financial information and banks must verify it prior to approving a loan. Examples of supporting financial information include income and assets, current debt obligations, credit history, employment status, and more. This information will be reviewed by the lender in order for them to make a fair judgment on the borrower’s behalf.

Adds CFPB director Richard Cordray, “When consumers sit down at the closing table, they shouldn’t be set-up to fail with mortgages they can’t afford. Our Ability-to-Repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes. This common-sense rule ensures responsible borrowers get responsible loans.”

There are other possible amendments to the new Ability-to-Repay rule that could come down the line, and if passed, these proposed amendments would be finalized this spring. The CFPB says they’re looking into specific exemptions for non-profit creditors that work with low- and moderate-income consumers, along with those for consumers who are trying to refinance from a risky mortgage to a more stable one.