No credit card required
Browse credit cards from a variety of issuers to see if there's a better card for you.
Perhaps a stupid question but is this new rule only for loans which are either going to be sold or insured by the government or a GSE?
i.e. is the jumbo lending space where lenders are either 1) portfolioing them, or 2) seasoning them for X number of months and then selling on secondary private market, included under the same 43% mandate?
@Revelate wrote:Perhaps a stupid question but is this new rule only for loans which are either going to be sold or insured by the government or a GSE?
i.e. is the jumbo lending space where lenders are either 1) portfolioing them, or 2) seasoning them for X number of months and then selling on secondary private market, included under the same 43% mandate?
Are you referring to the new "Qualified Mortgage" (QM) definition? Some background & info on this QM thing...
So lenders were getting sued left & right by consumers, and in many situations losing, because they put them in "risky" mortgages that they apparently shouldn't have ever handed out in the first place. The government didn't want this to happen again, so they offered some protection to lenders by laying out rules for making mortgages that will be "proven" to not be risky to consumers and that is what a QM is. Lenders do not need to make QM's unless they want to have that extra protection from litigation. All loans that are under Fannie, Freddie, FHA, VA or USDA financing which get automated underwriting approvals automatically fit the QM definition regardless of what the loan characteristics are. Loans still made under those entity's guidelines who are manually undewritten supposedly also meet them, however lenders & the CFPB haven't been too clear on that as of yet (it's been asked but no direct answer has been provided, so lenders are treading carefully). There are still lenders out there making mortgages that aren't QM's, either by offering interest only loans, terms longer than 30 years, or even just allowing DTI's over 43% even if it's not made under the aforementioned 5 entity's guidelines - and those are almost all being portfolio'd.
@ShanetheMortgageMan wrote:
@Revelate wrote:Perhaps a stupid question but is this new rule only for loans which are either going to be sold or insured by the government or a GSE?
i.e. is the jumbo lending space where lenders are either 1) portfolioing them, or 2) seasoning them for X number of months and then selling on secondary private market, included under the same 43% mandate?
Are you referring to the new "Qualified Mortgage" (QM) definition? Some background & info on this QM thing...
So lenders were getting sued left & right by consumers, and in many situations losing, because they put them in "risky" mortgages that they apparently shouldn't have ever handed out in the first place. The government didn't want this to happen again, so they offered some protection to lenders by laying out rules for making mortgages that will be "proven" to not be risky to consumers and that is what a QM is. Lenders do not need to make QM's unless they want to have that extra protection from litigation. All loans that are under Fannie, Freddie, FHA, VA or USDA financing which get automated underwriting approvals automatically fit the QM definition regardless of what the loan characteristics are. Loans still made under those entity's guidelines who are manually undewritten supposedly also meet them, however lenders & the CFPB haven't been too clear on that as of yet (it's been asked but no direct answer has been provided, so lenders are treading carefully). There are still lenders out there making mortgages that aren't QM's, either by offering interest only loans, terms longer than 30 years, or even just allowing DTI's over 43% even if it's not made under the aforementioned 5 entity's guidelines - and those are almost all being portfolio'd.
Yeah I was asking about the QM definition in a roundabout way apparently . Your explanation as always is greatly appreciated!
Are the DTI limits for a VA loan more laxed Shane.
Technically VA doesn't have a debt ratio limit. All that needs to be done is a residual income limit, however over the past few years VA automated underwriting has tightened up (they never say specifically by how much) so getting debt ratios approved at 60-70% used to be possible, but now it seems like it's in the 50's. If a VA loan doesn't get automated underwriting approval, most underwriters usually cap the DTI at 41%, allowing it to go higher when there are compensating factors.