What Is the QM patch, and what does It mean for mortgages?

Source: Deirdre Woolward, Million Acres (Motley Fool)

The CFPB created a rule designed to protect borrowers from getting in over their heads with a lot of debt. This is known as the "Qualified Mortgage," or QM, rule. It requires that borrowers have a debt-to-income ratio of below 43%. Putting a ceiling on a debt-to-income ratio prevents potential borrowers from having more debt than they can feasibly pay off.

However, the CFPB also built in an exception for mortgages backed by Fannie Mae and Freddie Mac, and this is called the QM patch. Some lenders are concerned that when the QM patch expires, it may be tougher for some low-income borrowers to get loans.

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