HUD has issued its own proposed definition of a "qualified mortgage (QM)." In order to receive QM status under its parameters, a loan must require periodic payments; have terms that do not exceed 30 years; and restrict upfront points and fees to no more than 3 percent. Those requirements are "consistent with the private sector and conventional mortgages guaranteed by Fannie Mae and Freddie Mac," according to a press release.
However, HUD does offer some exceptions to the QM rule finalized by the Consumer Financial Protection Bureau earlier this year. For example, it will not require that borrowers have a debt-to-income ratio of 43 percent or less. And while the CFPB version creates a "safe harbor" for loans with 1.5 percentage points, the threshold for FHA loans under the HUD proposal is 2.5 percentage points. The agency is seeking comment on the proposed rule by Oct. 30.