The Dodd-Frank Wall Street Reform Act establishes a Qualified Mortgage (QM) as the primary means for mortgage lenders to satisfy its “ability to repay” requirements. Dodd-Frank also provides that a QM may not have points and fees in excess of three percent of the loan amount.
As currently defined, “points and fees” include (among other charges):
- Fees paid to affiliated (but not unaffiliated) title companies
- Amounts of insurance and taxes held in escrow
As a result of this problematic definition, many affiliated loans, particularly those made to low- and moderate-income borrowers, would not qualify as QMs and would be unlikely to be made or would only be available at higher rates due to heighted liability risks. Consumers lose the ability to choose to take advantage of the convenience and market efficiencies offered by one-stop shopping.