The U.S. Department of Housing and Urban Development (HUD) recently finalized their qualified mortgage (QM) rule. The Dodd-Frank Act requires this rule by law and the HUD's definition of the rule closely reflects the Consumer Financial Protection Bureau's definition of the rule, which was released earlier this year. On January 10th, 2014 the new qualified mortgage rule will go into effect.

According to the HUD, a qualified mortgage must meet these rules: the loan does not have any risky features, the loan has regular, periodic payments, the loan term does not exceed 30 years, upfront points and fees are not greater than 3 percent of the total loan amount and the loan is insured or guaranteed by the FHA or HUD.

The rule also defines two different types of qualified mortgages - the Rebuttable Presumtion QM and the Safe Harbor QM. Lenders who follow the Safe Harbor QM can have the greatest confidence that they are following all rules set forth in the Truth-in-Lending Act. Consumers can only challenge lenders if there loan does not meet the requirements outlined under the Safe Harbor QM rules.

For more information about the rules and how they can impact you once they become effective, contact Prospect Financial Group, Inc. by calling 858-605-0952.