Earlier this month, the Department of Housing and Urban Development announced a revision to its definition for FHA-insured Qualified Mortgages (QMs) that applies to Section 501(c)(3) nonprofits that originate and service mortgages. However, HUD decided it would not adopt the CFPB’s post-consummation QM limited cure mechanism, which we discussed here, for purposes of HUD’s QM rule.
While HUD did adopt the CFPB’s amendment to the nonprofits exemption for purposes of HUD’s QM rule that applies to FHA-insured mortgages, it declined to adopt the CFPB’s cure that 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, it could violate the minimum 3.5% cash investment required by law for FHA loans. Moreover, because the QM points and fees limit is a requirement for FHA insurability, “it is imperative that FHA ensure all eligibility requirements are met prior to insurance endorsement,” HUD said.