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URL:  http://boards.fool.com/im-working-with-the-understanding-that-fannie--31106150.aspx

Subject:  Re: Current Underwriting Standards? Date:  2/7/2014  1:03 AM
Author:  CCinOC Number:  126799 of 128196

I'm working with the understanding that Fannie / Freddie guidelines for a QM (Quality Mortgage) has a hard stop back end ratio of 43%. As you mention, non-QM loans held for investment allow for a higher DTI with compensating conditions. ~crackdclaw

If you get an "approve/eligible" at any DTI, a lender will accept it provided that the lender doesn't have an overlay. Most lenders are running scared per QM, so they usually have an overlay of 43%.

Why?

Because the QM rules are written in such ambiguous and convoluted language that no one knows which end is up. From the lender's POV, better to err on the side of caution at 43% than push what is perceived to be the envelope and be wrong. Here's the so called final rule language from Consumer Finance Protection Bureau. If you can make sense of it, you're a better (wo)man than I.

SUMMARY OF THE ABILITY-TO-REPAY AND QUALIFIED MORTGAGE RULE AND THE CONCURRENT PROPOS