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What is a “qualified mortgage”?

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The Consumer Financial Protection Bureau has created a new classification of mortgage called the “qualified mortgage.”  The regulations will make sure that mortgage companies won’t give out mortgages to people who can’t afford them.  Simply put, riskier types of mortgages that were given out prior to the 2008 financial crisis will not be “qualified mortgages.”

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Most mortgage loans are “qualified mortgages” anyway, about 87%.

But the mortgage lenders get protection for giving out qualified mortgages: from lawsuits.  Not all mortgages have to be qualified mortgages, but the mortgage lenders won’t get relief from borrower lawsuits unless the mortgage is a qualified mortgage.

To be considered “qualified,” mortgages must follow specific product and underwriting criteria. They can’t have some of the features that proved to be disastrous in the housing bubble: terms longer than 30 years, structures where the principal balance increases (aka negatively amortizing loans), balloon payments, and fees and points that cost more than 3 percent of the loan. 

“Qualified Mortgage” Impact on Real Estate Market

But this makes things a little tougher for real estate agents, especially when selling houses using jumbo, or interest-only mortgages, which are not qualified mortgages.

But that might be a good thing? Axsmith-Law-foreclosure-stop-dc-philadelphia-HAMP-relief-divorce

And also, lenders will have a larger regulatory burden and the costs of that may be passed on to consumers.  As we see it, though…for the borrowers, there is somewhat of a break!

As the rule is written, Zugheri said, the most a lender can charge for a qualified mortgage ranging from $60,000 to $100,000 is $3,000, while the most it can charge for a $500,000 loan would be $15,000. “Some of the fixed costs are the same no matter what size loan you make, so some mortgage companies will just stop making smaller loans or will do fewer of them because they may even lose money on them.”

But, as in all these financial advantages, there can be downsides as well.  So as we say, READ THE FINE PRINT!

If you are having trouble with a foreclosure, foreclosure mediation, loan modification or other debt relief issues, phone Axsmith Law LLC at (202) 285-5415.

 

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