If the new mortgage acronyms “QM” and “ATR” have not hit your radar screen yet, now is the time to learn what they mean. QM stands for “Qualified Mortgage” and ATR stands for “Ability-to-Repay” and they are the center-piece of a new set of mortgage rules that went into effect on Friday as a requirement of the seemingly never-ending 2008 Dodd-Frank Wall Street Reform and Consumer Protection Act.
Moving forward, lenders will only be able to offer “Qualified Mortgages” that meet minimum “Ability-to-Repay” standards. The intent is to eliminate many of the risky mortgage programs that caused the mortgage collapse five years ago. Obviously, there are many politicians clueless to the fact that the industry has already naturally reacted and even over-corrected. Nevertheless, expect even greater underwriting scrutiny moving forward as there is more at stake than ever for lenders to substantiate and document a borrower’s income and assets. Needless to say, there will only be “full doc” loans offered going forward and it will be important for realtors and loan officers everywhere to educate buyers and set proper expectations that the loan process is now more difficult and cumbersome than ever.