If you look up the definition of a Qualified Mortgage (QM) in Section 1026.43(e)(2) of Regulation Z, you will see that there are a lot of criteria that must be met to have a QM. For instance, there are limitations on the loan term, the points and fees, and the APR, among other things. Additionally, there are several different types of QMs (General, Seasoned, Small Creditor, etc.) and each have their own specific set of criteria. Since financial institutions are not required to originate QMs, why would they want to go through all that work just to have one? The answer is, for the safe harbor, which gives a financial institution “protection” should the loan ever end up in court. Regulation Z provides two types of safe harbor for QMs, conclusive and rebuttable.
Kevin explains more in the video.
You can access the “Repayment Ability and Risk Requirements (Qualified Mortgage Rule) Matrix 6.2” that Kevin references in the video in our Free Lending Downloads.
Published
2024/04/08