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Volume 29 - Number 51

January 17, 2013

New Rules Tighten Standards for Nonprime Loans, But Little Impact Expected as Few are Originated

A number of rules from federal regulators in the past two weeks aim to tighten standards for nonprime mortgage lending, including requirements for ability to repay, appraisals and escrow accounts. Industry analysts suggest that the standards would have limited subprime mortgage lending during the boom of 2005, but those markets were dried up long before the new rules will take effect. In setting new rules for the nonprime market, federal regulators have established criteria for “higher-priced mortgage loans.” First-lien HPMLs are those with an annual percentage rate of at least 1.5 percentage points above the “average prime offer rate” for similar loan types, and more than 3.5 percentage points for junior-lien HPMLs. Some $12.38 billion in higher-priced mortgages were sold...

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Poll

What do you think is the biggest hurdle to meeting the new QM standards in the CFPB’s ability-to-repay rule?

A debt-to-income (DTI) cap of 43%.

48%

A 3% cap on points and fees.

29%

An interest rate cap of the average prime offered rate (APOR) plus 1.5%.

23%

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