Yesterday, The Department of Housing and Urban Development (HUD) issued its final Qualified Mortgage Rule, which is set to take effect on FHA-insured loans come January 10 of next year. Under this new rule, HUD has established two types of qualified mortgages: 1) a Safe Harbor Qualified Mortgage, and 2) a Rebuttable Presumption Qualified Mortgage.
A Safe Harbor Mortgage will be those loans that have an annual percentage rate (APR) equal or less than the average prime offer rate (APOR) plus 115 basis points and ongoing mortgage insurance premiums (MIP). Loans that stipulate the Safe Harbor guidelines provide lenders with the greatest level of certainty that they are in compliance with the “Ability-to-Repay” standard established by the Dodd-Frank Act.
A Rebuttable Presumption Mortgage will be those loans that have and APR that is greater than APOR in addition to 115 basis point and ongoing MIP. These loans will carry with them the presumption that the lender has determined the borrower has met the “Ability to Repay” standard. However, these loans afford opportunity for challenging that presumption, provided it can be proven that borrowers, in fact, did not have enough income to pay their mortgages in addition to other living expenses.
Click here to read the full report from HUD on the rule:
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