Guaranteed Rate Offers Consumer Resources on New Qualified Mortgage RulesDec 18 2013
Guaranteed Rate, the eighth-largest retail mortgage company in the nation, issued a guide for consumers on the new Qualified Mortgage (QM) rules being implemented next month by the Consumer Financial Protection Bureau.
The new rules, going into effect Jan. 10, 2014 as part of provisions from the Dodd-Frank Act of 2010, ensure that borrowers have a reasonable ability to repay a home loan and will not be offered risky loans or charged exorbitant fees. In addition, the ratio of loan payments to gross income will be lowered from 45 to 43 percent for non-agency and non-government loans. Loans can still be closed outside of the new limits, but lenders will carry greater legal liability for them. The rules also call for minimum underwriting and documentation standards.
These changes have caused some in the mortgage industry to fear a widespread impact on home sales. However, Victor Ciardelli, president and CEO of Guaranteed Rate, says those fears are overblown, citing an analysis which showed more than 99.4 percent of Guaranteed Rate’s loans over the past 18 months have been compliant with the new rules, with no adverse effects on the company’s growth in loan volume.
“Many lenders tightened their practices following the financial crisis. At Guaranteed Rate, responsible lending has always been a company priority, so the principles of the new Qualified Mortgage guidelines are something we’ve supported and have been implementing for quite some time,” Ciardelli said. “Most consumers will not see any difference in lending requirements moving into 2014, but we still want to help educate them on the new rules, because there has been a lot of conflicting discussion surrounding this topic.”
There are several types of loans that will not be considered qualified mortgage-compliant under the new rules, including anything the CFPB has determined to be “risky,” such as negative amortization loans, certain types of interest-only and jumbo loans, and loans with terms longer than 30 years, but these affect a very small number of buyers.
“Less than one percent of Guaranteed Rate’s loans are from categories that will be considered non-QM under the new rules,” said Rob Sampson, chief operating officer of Guaranteed Rate. “That said, there will still be options available for buyers who fall slightly outside of the qualified mortgage box – it will just require additional documentation on the part of the buyer and the lender to take on additional responsibilities to reduce the risk of default.”
In addition to the resource guide on the new Qualified Mortgage rules, www.guaranteedrate.com has a full complement of consumer resources, mortgage tips, and industry news.