Temporary exemption will allow government-backed loans to exceed 43 percent DTI
By Inman News, Thursday, January 10, 2013.Inman News®
A long-awaited rule that will require mortgage lenders to ensure that borrowers have the ability to repay their loans is getting mixed reviews from industry and consumer groups.
Aimed at protecting borrowers from risky and deceptive lending practices that contributed to the housing boom and bust, the ability-to-repay rule announced today by the Consumer Financial Protection Bureau will take effect Jan. 10, 2014.
The CFPB was charged with drafting and implementing the rule under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The announcement detailing the rule’s provisions sparked mixed reaction from mortgage industry and consumer groups.
Mortgage groups, in particular, had worried that the rule could further restrict an already tight lending environment. They praised a “safe harbor” policy that will provide some protection from lawsuits when borrowers take out lower-priced prime “qualified mortgages” intended for borrowers who are considered low risk.
Government-backed loans — including those eligible for purchase or guarantee by Fannie Mae and Freddie Mac — will temporarily be considered qualified mortgages even when borrower’s debt-to-income ratios exceed the 43 percent debt-to-income limit set by the rule.
The Center for Responsible Lending praised what it called the bureau’s balanced approach, although the group said it would have preferred that the rule allow any borrower to sue lenders who fail to evaluate their ability to repay.