Orion’s brokers who have been around for a while know that several years ago, Congress created, and President Obama approved, the Dodd-Frank Act. This legislation in turn led to the creation of the Consumer Finance Protection Bureau, and in turn the CFPB created Qualified Mortgage (“QM”) rules. “So what?” you ask? Now that the budget impasse has been “kicked down the road” until November 17th,Orion’s management can turn our attention, at least temporarily, back to focusing on your clients and our programs.
On January 10, 2014, the new QM (Qualified Mortgage) rules went into effect. There are rules limiting fees which may make it difficult to get a home loan for less than $150,000, as fees and points cannot exceed 3 percent of the loan amount. The maximum debt ratio (housing expense + other debt)/(gross monthly income) was set at 43percent. Anything above moved to a Non-QM” status.
Recall that the CFPB defined QMs as a safe harbor meaning that as long as the lender follows the QM rules then they cannot be asked to buy the loan back and they call sell 100percent of the loan. Lenders can still make whatever loans they want but will have no safe harbor for loans which do not follow the CFPB’s guidelines.
Initially, years ago, most in the industry believed that the result of this would be to eliminate some potential buyers and restrain home prices. There were some bizarre things said by politicians once these rules took effect. They questioned why the housing industry was potentially being hurt as it struggled to recover from2008-2010. We heard about "disparate impact" with certain groups complaining that lenders are using rules which have a greater effect on one particular ethnic group even though the rules were put in place by the government.
It has been several years since this was rolled out. Terrible things have not happened. Brokers know that some of the fears were realized and then corrected by regulators and the industry. Brokers also know that other issues have arisen since then which have also been corrected, or at least are trying to be addressed such as the ability for a loan officer to give up part of their commission to help their borrower.
Orion and our AEs continue to offer a wide range of products, with very competitive prices, to help all of your borrowers, despite changes in interest rates and the economic landscape. Be sure to talk to your Orion AE if you have questions about how any current changes will impact your client’s loan.
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