On January 10, 2014, new mortgage rules adopted by the Consumer
Financial Protection Bureau ["CFPB”], and required by the Dodd-Frank
Act, will go into effect. In anticipation of this upcoming deadline,
CFPB Director Richard Cordray has issued a letter to credit unions with
some pertinent information regarding "qualified mortgages.”
short, the new rules apply to all consumer-purpose, closed-end loans
secured by a dwelling, including home-purchase loans, refinances and
home equity loans - - whether first-lien or subordinate-lien loans.
First, you must assess and document a borrower’s ability to repay.
Second, you must determine if the loan you are making is a qualified mortgage. A qualified mortgage, or "QM,” would have: (1) points and fees less than or equal to 3% of the loan amount, with exceptions; (2) no high-risk features, such as negative amortization or interest-only; and (3) the loan term must not exceed 30 years.
if you write these types of loans, you should review Director Cordray’s
letter which includes links to other relevant information. Questions? Jerel Wright, (800) 362-2076, ext. 3102 | Gail Bright, (800) 362-2076, ext. 3103