State Finance Agency Loans Exempt from QM Rule

Lenders that want to continue making safe, affordable mortgage loans to lower-income borrowers once the qualified mortgage rule goes into effect might want to visit their state housing finance agency.

The Consumer Finance Protection Bureau exempted these state agency mortgage loans from the QM rule, according to Ballard Spahr attorney Richard Andreano.

Lenders that originate loans under a housing finance agency program and meet all the standards of that program are completely exempt from the QM rule, Andreano told NMN. It may prove to be an important exemption.

A borrower who obtains a loan that is exempt from the QM rule cannot sue the lender for failing to meet the QM ability-to-repay standards.

An exempt loan remains exempt even if it is sold, assigned, or otherwise transferred to a creditor that would not qualify for the exemption, according to a CFPB summary of this exemption. State HFAs securitize and sell mortgages.

The CFPB realized these state agency programs have good underwriting standards and restrictions on loan terms, fees and interest rates. They are very consumer protective, the Ballard Spahr partner said.

So the bureau decided it wouldnt make sense to overlay QM restrictions on the state agency programs.

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