The Department of Housing and Urban Development on Wednesday released its final rule defining what constitutes a "qualified mortgage."

HUD's final rule, which goes into effect Jan. 10, creates two types of qualified mortgages — a safe harbor and a rebuttable presumption — with protections for consumers and different legal consequences for lenders.

HUD oversees the Federal Housing Administration, which serves low-income and first-time homebuyers and has a 3.5% minimum down payment requirement.

Under HUD's final rule, a "safe harbor" will be given to loans with annual percentage rates equal to or less than the average prime offer rate plus 1.15 percentage points and ongoing mortgage insurance premiums. Loans with the safe harbor definition offer lenders the greatest legal certainty that they are complying with the so-called ability-to-repay standard and, therefore, are not likely to be sued.

Loans with an APR greater than the average prime offer rate plus 1.15 percentage points and ongoing mortgage insurance premiums receive the "rebuttable presumption," classification, meaning lenders are presumed to have determined a borrowers' ability to repay the loan though consumers can still challenge that presumption.

HUD's final rule will not require that borrowers have a debt-to-income ratio of 43% or less, which is a requirement of the Consumer Financial Protection Bureau's QM rule. HUD already requires that lenders assess a borrower's ability to repay their mortgage, and applications for borrowers with DTI ratios above 43% must be manually underwritten to qualify for FHA insurance.

HUD adopted the CFPB's list of transactions that are exempt from the ability-to-repay requirements including reverse mortgages, bridge loans with terms of a year or less and construction-to-permanent loans of a year or less for the construction phase.

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