Final QM Definition Released By HUD

12 Dec

The Department of Housing and Urban Development on Wednesday released its final rule defining a “qualified mortgage” that is guaranteed or administered by HUD, effective Jan. 10, 2014, applying to all mortgages with case number assignments on or after that date.

HUD proposed a QM definition aligned with the Ability-to-Repay criteria contained in the Truth-in-Lending Act as required by the Dodd-Frank Act and the agency’s mission to promote affordable mortgage financing options for underserved borrowers.

Under HUD’s QM definition, mortgage loans must require periodic payments without risky features; have terms that don’t exceed 30 years; be insured or guaranteed by FHA/HUD; and limit upfront points and fees to no more than 3% with adjustments to facilitate smaller loans, with certain exceptions.

HUD’s rule also adopts the CFPB’s list of transactions that are exempt from the ability-to-repay requirements, including reverse mortgages.

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