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Inside Take: a 43 Percent DTI for the QM Rule?

January 9, 2013

QM Rule Preview: Safe Harbor for LP and DU Loans, DTI at 43 Percent? 

By Paul Muolo /

The Consumer Financial Protection Bureau is expected to unveil its long anticipated ‘Qualified Mortgage’ rule Wednesday night to select parties who are anticipating that a legal safe harbor will be provided on mortgages that are underwritten through Fannie Mae and Freddie Mac’s automated underwriting systems.

Industry officials told Inside Mortgage Finance that a safe harbor also will be provided for mortgages that are underwritten using FHA’s Total Scorecard program.

The debt-to-income ratio for manually underwritten loans will be set at 43 percent, officials are speculating.

Sources said loans that do not exceed the APOR (average prime offer rate) by 150 basis points also will be given a legal safe harbor.

A research note put out by FBR Capital Markets predicts the final definition of a qualified mortgage “will require the loan to be fully documented, points and fees will be capped at 3%, and product features such as prepayment penalties, negative amortization, and balloon payments will be banned.”   

“The more loans qualify for a safe harbor, the more the regulations will be viewed as positive for mortgage credit availability,” writes FBR analyst Edward Mills and his team. See Inside Mortgage Finance’s upcoming issue for complete and extended analysis.


One source said affiliated business arrangements may not be part of the final rule. A CFPB spokeswoman declined to comment on the release date of QM.



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Should the FHA cut premiums?

Yes, the MMIF has surpassed the 2 percent minimum. It’s time to help first-time home buyers.
Yes, but not until mid-2016 at least, when we see how the fund is doing.
No. The MMIF needs to rebuild and prepare for another potential downturn – just in case.
No. We believe the minimum ratio should actually be raised to 4 percent or higher.
I am undecided.

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