Sarasota Real Estate Market News

NAR recommends qualified mortgage rules

WASHINGTON – July 22, 2011 – Today, the National Association of Realtors® submitted its recommendations for a Qualified Mortgage (QM) Rule being considered by the Federal Reserve.

The Fed is implementing a new law, the Truth in Lending Act (TILA), which is part of the massive Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. (While they share many goals, the QM rule is separate from the Qualified Residential Mortgage or QRM rule under consideration by other federal agencies.)

Under TILA, the Fed must create a rule that would prohibit any creditor from providing a mortgage loan without “a reasonable and good faith determination that the borrower has the ability to repay the loan.”

The proposed rule gives creditors four ways to comply with the “ability to repay” requirement and creates criteria for compliance. Once finished, the Board will transfer all comments to the Consumer Financial Protection Bureau (CFPB), which assumed rulemaking authority on July 21, 2011.

NAR focused on three points of concern to Realtors:

• Seller financing should continue to be exempt from the ability-to-repay requirements, providing it fits the legal definition of “seller.” Generally, anyone who extends credit to a consumer more than five times per year is considered a creditor rather than a seller.

• The QM definition should include stronger consumer protections than currently proposed, promote liquidity, add ability-to-repay standards and offer lenders a safe harbor that reduces litigation.

• The QM rule’s 3 percent cap on points and fees should be adjusted, NAR says. One option is to reinstate the affiliated business exemption from the Real Estate Settlement Procedures Act (RESPA). Failing that, the rule should remove the cost of title and escrow charges from the calculation for fees and points.

NAR has posted its comment letter about ability to pay under the propose QM rules.

The original rule proposed by the Federal Reserve was posted in the Federal Register and also available online.

© 2011 Florida Realtors®

July 29, 2011 - Posted by | News related to Financing

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