How will QM/ATR affect your business? (Part 1)

 

Last week we had a link of the 22 minute video produced by the Consumers Financial Protection Bureau, to give you some backdrop about what QM and ATR were.  This week let's dig a bit deeper in how it will affect your business.
Ability to Repay really not a big deal

The Ability-to-Repay rule sounds like a bit of common sense, after all who wants to lend money to anyone that can't pay it back?  However it was created to combat the loose credit standards that were introduced during the 2004, 2005 era - the NINA, NINANE, the SIVA, SISA, and the Santa Maria (ok, I made up the last one.  The others were loan programs that were No Income, No Asset, No Employment or Stated Income, Stated Asset programs).  You won't see much of a difference when it is enacted because lenders have long since tightened up credit guidelines back to a standard "full doc" world.  Under the ATR lenders have to check documentation like W-2s and pay stubs, and consider eight types of information:

 

1. Your current income or assets
2. Your current employment status
3. Your credit history
4. The monthly payment for the mortgage
5. Your monthly payments on other mortgage loans you get at the same time
6. Your monthly payments for other mortgage-related expenses (such as property taxes)
7. Your other debts
8. Your monthly debt payments, including the mortgage, compared to your monthly
income (“debt-to-income ratio”). The lender may also look at how much money you have
left over each month after paying your debts.

 

The lending industry has already tightened the requirements, so you won't see much (if any) difference here.

 

Next week we'll dig deeper into the Qualified Mortgages piece.  Be sure to look for it! 

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