Recently, the Department of Housing and Urban Development proposed its own “qualified mortgage” rule designed to supplant the temporary qualified mortgage rule for Federal Housing Administration insured loans promulgated by the Consumer Financial Protection Bureau. Earlier this year, the CFPB issued regulations for originators and servicers of mortgages, which included a temporary qualified mortgage definition for FHA loans. Qualified mortgages made within the applicable requirements provide institutions with a level of legal protection against lawsuits filed by borrowers under the Truth-in-Lending Act.
HUD has been under pressure to replace the temporary CFPB definitions because of recent mortgage insurance premium increases. The CFPB qualified mortgage rule may cause fewer FHA loans to qualify for safe-harbor liability protection. Because mortgage insurance premiums are built into the annual percentage rate, and a new requirement makes mortgage insurance premiums permanent when the loan-to-value is over 90 percent, more FHA loans would likely fall into the higher-priced mortgage loan designation.
HUD is proposing different qualified mortgage standards, and it also alters the CFPB’s method for determining which loans receive the safe harbor and which receive a “rebuttable presumption” of compliance. HUD has issued an abbreviated comment period of 60 days for its qualified mortgage rule, which is clearly geared toward the HUD rule taking effect in January 2014 at the same time as the CFPB rule.
Lenders that have questions about the specifics of the HUD qualified mortgage rule or that are interested in submitting comments upon reviewing the details should contact Spilman or other knowledgeable counsel.