The Department of Housing and Urban Development's recent proposal regarding the definition of "qualified mortgages" differs from the Consumer Financial Protection Bureau's QM rule. These key differences are causing lenders to be overwhelmed with how to implement the agency's plan.

The two most significant changes to CFPB's regulation are HUD's removal of a required 43% debt-to-income ratio and the removal of the cost of mortgage premiums from an interest rate pricing cap.

"Everybody is just puzzled right now," said David Bryles, executive vice president of Iberiabank Mortgage in Little Rock, Ark. "It's the process of having to test for every loan before closing to make sure it's not outside of QM. And that's going to take the form of credit tightening and a slowing down of the process, and making the process more expensive for the borrower because we can't take a loan that's not going to be sold into a mortgage-backed security during the life of the loan."

HUD's proposal, issued last week, has had a muted response in comparison to initial complaints when the CFPB first released its QM proposal in January. Observers say the lack of response is likely due to overwhelmed lenders trying to implement the new mortgage rules prior to a January 2014 implementation deadline.

For the full piece see "Lenders Scrambling to Deal with HUD's Alternative QM Definition" (may require subscription).