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Bill Seeks to Address 3% Cap in Qualified Mortgage Rule

A bill crucial to maintaining affordable mortgage financing by addressing a problem in regulators' Qualified Mortgage (QM) rule was introduced in the Senate last week. "The Consumer Mortgage Choice Act," s. 949, by Sens. Joe Manchin (D-W.V.) and Mike Johanns (R-Neb.), would address the 3 percent cap on points and fees in the QM rule's "ability-to-repay" provisions. A companion bill was earlier introduced in the House. The legislation is particularly important to real estate firms with affiliates and small and mid-sized lenders and mortgage brokers. Without it, up to half of the loans lenders make would not meet the qualified mortgage test and would either not be made or would have to be made by large lenders who do not have to count the same items in their fees and points calculations under the test, according to NAR. The QM rule is set to take effect in January 2014.

Importantly, NAR leaders note that recent amendments approved by the Consumer Financial Protection Bureau (CFPB) to revise rules on how to calculate loan origination compensation failed to address some key issues related to the 3 percent cap on points and fees, such as whether loan level price adjustments, affiliate title fees, and escrow for insurance are counted against the 3-percent cap. As a result, the REALTOR® organization continues to seek enactment of The Consumer Mortgage Choice Act (H.R. 1077 and S. 949), which would look at the 3 percent cap to help ensure consumers have the broadest access to credit and services they need.

 

 

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