CFPB Updates QM and ATR Small Entity Compliance Guide
by: Anna DeSimone
August 14, 2013 the CFPB updated its Small Entity Compliance Guide to the Ability to Repay and Qualified Mortgage Rule. The Bureau updated this guide to reflect finalized changes to the rule. The revisions amend the final rule issued January 10, 2013,which is set to take effect on January 10, 2014.Notable changes impacting guide content include:
Exemptions:
Regulation Z generally prohibits a creditor from making a mortgage loan unless the creditor determines that the consumer will have the ability to repay the loan. The June 2013 ATR/QM Concurrent Final Rule provides an exemption to these requirements for:
Creditors with certain designations,
Loans pursuant to certain programs,
Certain nonprofit creditors, and
Mortgage loans made in connection with certain Federal emergency economic stabilization programs.
Qualified Mortgages (QMs):Loans Held in Portfolio by Small Creditors.
The June 2013 ATR/QM Concurrent Final Rule provides an additional definition of a qualified mortgage for certain loans made and held in portfolio by small creditors.
Qualified Mortgages: Balloon Loans.
The June 2013ATR/QM Concurrent Final Rule provides a transitional definition of creditors eligible to originate Balloon-Payment QMs.
Qualified Mortgages: Higher-Priced Mortgage Determination.
The June 2013 ATR/QM Concurrent Final Rule shifts the annual percentage rate (APR) threshold for Small Creditor and Balloon-Payment QMs from 1.5 percentage points above the average prime offer rate (APOR) on first-lien loans to 3.5 percentage points above APOR.
Points-and-Fees Calculation: Inclusion of Loan Originator Compensation.
The June 2013 ATR/QM Concurrent Final Rule modifies the requirements regarding the inclusion of loan originator compensation in the points-and-fees calculation.
Qualified Mortgages: Determining Eligibility under the Temporary Definition.
The July 2013 Final Rule clarifies how eligibility will be determined for QMs under the temporary provision allowing QM status for loans eligible for purchase, guaranty, or insurance by the GSEs or certain federal agencies.
Qualified Mortgages: Determining Debt and Income under the General Definition.
The July 2013 Final Rule amends and clarifies how debt and income will be determined under appendix Q for the purpose of meeting the 43%DTI requirement under the general QM provision.
About the Author:
Anna DeSimone is President and Founder of Bankers Advisory, Inc. She can be reached at anna@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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