Final QM guidelines issued for VA mortgages
COMPLIANCE NEWS |
In May, the Department of Veterans Affairs (VA) issued an interim final rule that defines VA mortgage products that meet the Ability-to-Repay provisions of the Truth-in-Lending Act. This rule replaces an earlier standard issued in January by the Consumer Financial Protection Bureau. The rule was effective on May 9, 2014, but open to public comment through early June.
Under the interim VA rule, almost all VA-guaranteed mortgage loans that meet current VA underwriting standards are considered "qualified mortgages." The rule granted safe harbor to these qualified mortgages, even if they did not have the 43 percent debt-to-income ratio that applies to qualified mortgages issued by most other lenders. According to the VA, about 95,000 of the mortgage loans the agency guaranteed in 2013 exceeded the 43 percent ratio.
The principal exception to the qualified mortgage provision is certain loans made through VA's Interest Rate Reduction Refinance Loan (IRRRL) program. In order to be considered a safe harbor qualified mortgage, an IRRRL must have been in place at least six months and not been more than 30 days past due in the preceding six months. If an IRRRL does not meet these safe harbor standards, the lender may still use a rebuttable presumption that the mortgage met ability to repay requirements. The rule also excluded IRRRLs from several income verification requirements if points and fees do not exceed 3 percent of the total loan amount.