The new federal agency Consumer Finance Protection Bureau’s (CFPB) Qualified Mortgage & Ability To Pay (ATR) regulations require mortgage lenders in Raleigh and Cary and all other US markets to clearly establish and document a borrower’s ability to be expected to repay the loan they have agreed to make, as well as to meet certain rules to be classified as a Qualified Mortgage.
For the most part, the market has already voluntarily adopted the ATR most lenders and have already been diligently documenting a borrower’s ability to repay, with underwriting documenting income analysis using the Income Worksheets and supporting documentation long .
The regulation also sets APR limitations in determining whether a loan is Higher Price Mortgage Loan (HPML) or not, including a 3% fee cap for most loans that must be considered when processing, underwriting and closing loans. The QM regulation was designed to prohibit risky features and practices in lending, better define some lending requirements and provide enhanced consumer protections during the lending process.
Qualified Mortgages provide a limited protection for lenders against borrower legal actions provided documentation and other requirements are met. The regulation does not make Non-QM loans illegal and some lenders may choose to make Non-QM loans however at this time there are only a handful of lenders willing to make non QM loans. To date, non-QM loans tend to be reserved for the very wealthy who are still getting interest only and balloon loans that are examples of ‘risky’ loans considered to be non-qualified mortgages by CFPB.