Federal regulators proposed on Wednesday a new rule that would make mortgage lending standards less restrictive.
The proposed new Qualified Residential Mortgage rule, released jointly by six government agencies, was cheered by both consumer advocates and mortgage industry members–who typically don’t see eye-to-eye on much–largely because it eliminates much stricter down payment rules that the previous version of QRM would have created.
The new proposal aligns QRM with the Consumer Financial Protection Bureau’s Qualified Mortgage (QM) rule, which was finalized earlier this year but won’t be effective until Jan. 10, 2014, according to the CFPB.
The CFPB’s QM rule requires lenders to underwrite home loans based on the borrower’s ability to repay the loan, a step the agency took to combat some of the bad lending practices that led to the housing crisis.
Under the CFPB’s QM rule, borrowers must provide income documentation that they can repay the loan, and that their debt-to-income ratio does not exceed 43 percent, among other requirements. It does not, however, have any rules requiring lenders to ask for a set down payment amount.
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