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Monday, November 3, 2014

HUD Declines to Include Points and Fees Cure in QM Definition

The Department of Housing and Urban Development is issuing a revision to its definition for FHA-insured Qualified Mortgages that applies to Section 501(c)(3) nonprofits that originate and service mortgages. In doing so, HUD declined to adopt the limited cure provision adopted by the CFPB.

The cure allows a lender who intends to originate a Qualified Mortgage — but who later finds that the points and fees charged exceed the 3% cap — to refund the excess and retain QM protections.

HUD said that if it allowed an FHA lender to return funds to a borrower, however, it could violate the minimum 3.5% cash investment required by law for FHA loans. Moreover, because the points and fees cap is a requirement for FHA insurability, “it is imperative that FHA ensure all eligibility requirements are met prior to insurance endorsement,” HUD said.

Read HUD’s announcement.

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