On September 27, 2013, the Department of Housing and Urban Development (“HUD”) released a proposal defining what constitutes a “qualified mortgage” (“QM”) for purposes of loans insured by the Federal Housing Administration (“FHA”) . Once this proposal is finalized and takes effect, it will replace the temporary QM definition for FHA loans established by the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) in its January 2013 Ability-to-Repay/Qualified Mortgage Rule (“ATR/QM Rule”). QMs, when made in accordance with the applicable requirements, provide lenders with some legal protection against borrower lawsuits under the Truth in Lending Act (“TILA”) alleging the lender did not sufficiently consider the borrower’s ability to repay the loan.
The CFPB’s temporary QM definition will continue to apply to loans that are eligible to be guaranteed or insured by the Department of Veterans Affairs and the Department of Agriculture until those agencies establish their own QM definitions. Similarly, the CFPB’s temporary QM definition will continue to apply to loans that are eligible to be purchased or guaranteed by Fannie Mae, Freddie Mac, or any successor entity for as long as those entities remain under the conservatorship or receivership of the Federal Housing Finance Authority or until January 10, 2021, whichever is earlier.
Please see full Special Alert below for more information.
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