Oh boy, more government regulations affecting consumers seeking mortgage loans that are eligible for Fannie Mae, FHA and Freddie Mac pricing. Could this be the last? We can only hope. However, for now the letters QM or qualified mortgage need to be understood and dealt with, like it or not. It is one of the final pieces of the Dodd-Frank Act. Whew!
On Jan. 10, QM went into full swing. It contains two main terms we all need to understand: “ability to repay” and “qualified mortgage.” Ability to repay is merely a refocus, once again, on the borrower’s income, credit and liabilities. If you have a mortgage, you surely went through this taxing scrutiny. It is the name of the game. So, what’s new? Extra scrutiny on the borrower’s income calculations and a new limit of 43 percent debt-to-income ratio.