February 8th, 2014 4:44 PM by Sam Kader MLO# 130505
Effective Jan. 10th 2014 - the new federal rule of Ability to Re-pay (ATR) and Qualified Mortgage (QM) threw another twist to mortgage lending. Borrowers need to pass QM test in order to obtain home loans backed by Fannie and Freddie. QM is further divided into General QM and Agency QM. The tests are so stringent that experts predict one in five borrowers will be ineligible due to QM test.
Under Agency QM - loans may still be originated with Automated Underwriting System (AUS) approved status even though it may fail the DTI test. Interest only and loans greater than 30 years are not eligible under the QM rule.
Ability-To-Repay (ATR) - It means that lenders have to look at more documents proving a borrower's income, assets, credit history, monthly expenses and employment situation (like we haven't already). The idea is to keep homebuyers out of mortgages that they can't afford.