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Lenders can no longer make some types of loans, such as “Alt-A,” in which a borrower is allowed to provide little or no financial information before being given a mortgage. But such risky products are less available since the crisis anyway, brokers and lenders say.

Borrowers and lenders will face even more requirements if a lender chooses to make a qualified mortgage, which requires loans to meet three measurements. In one, points and fees cannot exceed 3 percent of the loan amount, although higher percentages are permitted if the loan is below $100,000. In another requirement, a loan term cannot exceed 30 years.

The general category of qualified mortgages also requires a borrower’s debt-to-income ratio not to exceed 43 percent. If a qualified mortgage is eligible for purchase by Freddie Mac or Fannie Mae or to be insured by government agencies, the debt-to-income requirement does not apply, under a provision set to run until 2021.

Lenders don’t have to make qualified mortgages, but they receive certain legal protections if they do. If a court determines a loan met the qualified-mortgage requirements and also fits within a certain interest-rate threshold, a borrower could not win a lawsuit alleging a lender did not properly calculate their ability to repay, according to the Consumer Financial Protection Bureau.

Worried about legal repercussions, some lenders say they will make only qualified mortgages. Richard Cordray, director of the bureau, has says that the vast majority of loans made in today’s market would meet qualified mortgage requirements.

©2014 The Charlotte Observer (Charlotte, N.C.)
Distributed by MCT Information Services

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