QM - What Changed?
- Abandon Appendix Q
- Rate Threshold Determination for QM Status: 2.25%
- Seasoned QM for performing loans > 36 months
- 4 month either/or GSE status patch - use either old or new guidelines
What didn't change
- Compensation limits
- Loan type constraints
- Transaction exemptions
- Qualifying rate
At the core of the Qualified Mortgage (QM) rules is the issue of the borrower's ability to repay. One of the most significant effects of the Trump Administration's housing policy efforts was shepherding the GSEs (Fannie Mae and Freddie Mac) out of the business of providing government guarantees. The vast majority of QMs were made by virtue of an automatic waiver of QM rules for loans guaranteed by the government like Fannie and Freddie, but also FHA, VA, USDA.
The deregulators conceived of a much simpler test for a qualified mortgage. Instead of a 43% DTI measurement, along with a myriad of guidelines for what could be used, they chose an agnostic indicator for QM status: the rate. If it's less than 2.25% over the Average Prime Offered Rate (APOR), it qualifies for presumption of rebuttable status. And it's so simple...
Sadly, nothing's that simple. It was a quick fix and the rate trigger crossed over some other regulations which add a layer of complexity, most notably the HPML Rules.