Qualified Mortgage Information
Settlements, Ltd. is a small, independently run closing company that can help you and your clients under the new Consumer Finance Protection Bureau legislation aimed at stricter regulation of borrowing costs. New rules, promulgated by the CFPB, have gone into effect with the intention of guarding against risky lending practices, many of which led to the greatest collapse in U.S. home prices since the Great Depression. These rules will hold mortgage lenders legally responsible for ensuring that consumers can repay their mortgages. The rules also create a new qualified mortgage “QM” category with better protections for borrowers. The CFPB believes that there are still 1 in 10 homeowners who owe more on their mortgages than their homes are worth.
What does that mean to us?
- Upfront fees and points for a QM cannot be more than:
- 3% of the total mortgage balance for loans of $100,000 or more
- $3,000 for loans between $60,000 and $100,000
- 5% for loans between $20,000 and $60,000
- $1,000 for loans between $12,500 and $20,000
- 8% for loans less than $12,500
When an IN-HOUSE OR AFFILIATED settlement company closes a loan for a mortgage lender, the fees and points charged by a lender will include title insurance, title endorsements, the closing protection letter, survey, inspection, document preparation and notary fees in addition to bank charges. These charges ARE NOT included in the 3% figure when SETTLEMENTS, LTD. closes the loan.
Large companies will not tolerate the losses these regulations are likely to impose. The lender may overcome this 3% restriction by lowering its fees but increasing the interest rate your borrower pays. Do you want to be the realtor who refers your client under these circumstances, especially if this option is not clearly explained to your client?
In addition, many lenders with in-house settlement companies may try to circumvent this law by terminating the formal relationships with their in-house settlement companies. However, they will enter into some form of marketing agreement with the settlement companies essentially changing nothing.
SETTLEMENTS, LTD., AS AN INDEPENDENT CLOSING COMPANY LED BY ATTORNEY DEBRA D. PATTI, CAN HELP YOU AND YOUR BORROWER AVOID EXCESSIVE FEES, HIGHER INTEREST RATES AND OTHER PROBLEMS INHERENT IN THE CLOSING PROCESS. THINK OF US THE NEXT TIME YOU REFER YOUR BORROWER FOR CLOSING.