This past January, a new era began for mortgage originators, because they are now in more of a position to be advocates for homeowners. This change was the result of the new Qualified Mortgage (QM) provisions and the Ability-to-Repay (ATR) rule. Many potential or current homeowners have a hard time understanding the different rules and regulations that are in place to protect them from abusive lending practices, and as the originator or mortgage broker you have the opportunity to help them understand the options that are available. Part of this educational process is helping borrowers to see the various types of loans that they will qualify for, including loans through institutions that offer wholesale lending.
Efforts for Education
Because of the new regulations, it makes it more difficult for potential homebuyers to navigate the mortgage rules on their own, which is why they need to lean on a mortgage professional for help. The Consumer Financial Protection Bureau recently launched an educational campaign to help consumers understand more about their mortgage options.
In addition to this educational campaign, there are many opportunities for institutions to build relationships with the consumer. Through high quality service, technical proficiency, and a relationship of trust, originators can grow their business even though the origination market is declining. The best thing that an originator can do is to build a relationship of trust with the consumer, and establish themselves as an expert in Qualified Mortgage loans.
What is a Qualified Mortgage Loan?
In order for a mortgage to be considered a Qualified Mortgage loan, there are specific standards that need to be met. These standards have been established by the federal government, and the lenders are responsible to make sure they are following the rules and regulations that have been put in place. One of the rules that has to be considered is the Ability-to-Repay rule.
The purpose of the QM loans is to help consumers find mortgage options in a safer environment. Before the housing crisis in 2008, there were certain mortgage features and products that were high risk. Some consumers agreed to those mortgage terms, not fully understanding the implications that their decision would have later on.
The advantage of QM loans for the buyer is the fact that they can have the peace of mind to know that it is a safer option. The advantage of QM loans to the lender is the fact that they will receive a certain level of legal protection if a borrower sues the institution.
Qualified Mortgage loans were used in relation to the Dodd-Frank Wall Street Reform and Consumer Protection Act, where a general outline of these mortgages was listed. After the law went into effect on July 21, 2010, the next task was to finalize the definition of Qualified Mortgage loans so that it was standard across the industry.
If you would like to learn more about Qualified Mortgage (QM) loans, and have any other questions related to the mortgage industry or wholesale lending, please feel free to contact Dave or call (303) 520-0004.
