{"id":199,"date":"2014-01-10T14:38:02","date_gmt":"2014-01-10T14:38:02","guid":{"rendered":""},"modified":"2016-08-04T19:51:36","modified_gmt":"2016-08-05T00:51:36","slug":"qualified-mortgage-rule-explained-for-2014","status":"publish","type":"post","link":"http:\/\/margaretcanfield.com\/blog\/2014\/01\/qualified-mortgage-rule-explained-for-2014\/","title":{"rendered":"Qualified Mortgage Rule Explained for 2014"},"content":{"rendered":"\n\n\n
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What is QM?<\/b><\/span><\/span> <\/p>\n
    \n
  • The Dodd-Frank Act requires the Consumer Financial Protection Bureau (CFPB) to issue and implement regulations requiring creditors to assess a consumer’s ability to repay a residential mortgage and define “qualified mortgages” that presumptively comply with ability-to-repay (ATR) requirements<\/li>\n
  • Effective January 10, 2014, The ATR \/ Qualified Mortgage rule requires a creditor to make a reasonable and good faith determination at or before loan closing that the consumer will have a reasonable ability to repay the loan according to its terms<\/li>\n<\/ul>\n

    QM \/ Ability-to-Repay Requirements<\/b><\/span><\/span> <\/p>\n

      \n
    • Income, assets and debts must be documented and verified<\/li>\n
    • A borrower’s monthly debt, including the mortgage, cannot be more than 43% of the borrower’s monthly pre-tax income<\/li>\n
    • ARMs
      – The qualifying payment must be based on the maximum possible rate in the first 5 years<\/li>\n<\/ul>\n
        \n
      • QMs may not have the following risky loan features:
        – An “interest-only” period
        – Negative amortization
        – Balloon payments
        – Graduated payments
        – Loan term greater than 30 years
        – Points and fees greater than the following:<\/li>\n<\/ul>\n

         <\/p>\n

         <\/p>\n

        Does NOT include<\/b> <\/p>\n

          \n
        • Realtor fees<\/li>\n
        • Appraisal costs (unless third party affiliate)<\/li>\n
        • Title costs (unless 3rd party affiliate)<\/li>\n
        • Credit reports<\/li>\n<\/ul>\n

          Points and Fees included<\/b> <\/p>\n

            \n
          • Fees paid to lender<\/li>\n
          • Fees paid to lending affiliates<\/li>\n
          • Mortgage Broker Compensation<\/li>\n
          • > Discount points (up to 2 discount points may be excluded if a test is performed to determine if the interest rate reduction is consistent with the discount points paid)<\/li>\n<\/ul>\n

            Citi Credit Policy Under QM<\/b><\/span><\/span> <\/p>\n

              \n
            • 40 year term mortgages no longer offered<\/li>\n
            • Interest Only Loans only offered through the High Net Worth Program<\/li>\n
            • 5-1 ARM 5-2-5 no longer offered; continue to offer 5-1 ARM 2-2-5
              – Maximum rate increase of 2% after 5-year fixed period
              – No more than 2% increase over the original note rate per adjustment period
              – No more than 5% increase over the original note rate over the life of the loan<\/li>\n
            • HPML transactions will be limited to FHA\/VA (non-streamline) and NACA\/Bond Programs<\/li>\n
            • Maximum DTI 43% for general QM and Agency QM loans the DTI must meet agency guidelines<\/li>\n
            • The Fixed Rate Home Equity Loan must comply with QM requirements including maximum DTI of 43%<\/li>\n
            • Temporary \/ partial term buy downs no longer allowed<\/li>\n
            • Non-taxable income must use the borrower’s previous year tax rate for the gross up calculation. Non taxable must be grossed up if the borrower needs the additional income to qualify<\/li>\n<\/ul>\n

              QM Implications<\/b><\/span><\/span>
              Qualified Mortgage Loans are presumed to satisfy the ATR rule Non-Qualified Mortgage Loans must be in compliance with the ATR rule but still are considered Non-Qualified Mortgage Loans.<\/p>\n

              Non-QM loans include:<\/b> <\/p>\n

                \n
              • Negative amortization<\/li>\n
              • No-doc loans<\/li>\n
              • Balloon payment loan<\/li>\n
              • Interest-only<\/li>\n<\/ul>\n

                New ATR Underwriting<\/b><\/span><\/span>
                The customer’s ability to repay must be verified through third party documents considering a minimum of eight underwriting factors: <\/p>\n

                  \n
                • Credit history<\/li>\n
                • Current and expected income or assets<\/li>\n
                • Employment status<\/li>\n
                • Monthly debt to income ratio or residual income<\/li>\n
                • Current debt obligations, alimony, and child support<\/li>\n
                • The monthly payment for mortgage-related obligations<\/li>\n
                • The monthly payment on the subject loan and<\/li>\n
                • The monthly payment on any simultaneous loan<\/li>\n<\/ul>\n

                  New Appraisal Rule<\/b><\/span><\/span> <\/p>\n

                    \n
                  • Borrowers for first-lien loans must to be provided with copies of all appraisals, as well as other written valuations, developed in connection with the application, whether or not the applicants request copies. If more than one appraisal or written valuation is received, the borrower will be sent all.<\/li>\n
                  • The copies must be provided promptly upon completion or 3 business days prior to consummation, whichever is earlier
                    – The above requirement applies whether the credit is extended or denied, or the application is incomplete or withdrawn
                    – Copies of the appraisal or other written valuation may be provided by mail or electronically subject to E-sign Act Requirements
                    – A disclosure must be provided to the applicant no later than 3 business days after receiving the application notifying the applicant of their right to receive copies of all written appraisals developed in connection with their application<\/li>\n<\/ul>\n

                    <\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

                    What is QM? The Dodd-Frank Act requires the Consumer Financial Protection Bureau (CFPB) to issue and implement regulations requiring creditors to assess a consumer’s ability to repay a residential mortgage and define “qualified mortgages” that presumptively comply with ability-to-repay (ATR) requirements Effective January 10, 2014, The ATR \/ Qualified Mortgage rule requires a creditor to […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-199","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-lake-geneva-real-estate","7":"entry"},"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/margaretcanfield.com\/blog\/wp-json\/wp\/v2\/posts\/199","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/margaretcanfield.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/margaretcanfield.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/margaretcanfield.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"http:\/\/margaretcanfield.com\/blog\/wp-json\/wp\/v2\/comments?post=199"}],"version-history":[{"count":1,"href":"http:\/\/margaretcanfield.com\/blog\/wp-json\/wp\/v2\/posts\/199\/revisions"}],"predecessor-version":[{"id":467,"href":"http:\/\/margaretcanfield.com\/blog\/wp-json\/wp\/v2\/posts\/199\/revisions\/467"}],"wp:attachment":[{"href":"http:\/\/margaretcanfield.com\/blog\/wp-json\/wp\/v2\/media?parent=199"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/margaretcanfield.com\/blog\/wp-json\/wp\/v2\/categories?post=199"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/margaretcanfield.com\/blog\/wp-json\/wp\/v2\/tags?post=199"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}