ATR/QM FAQ DISCLAIMER:

Transcription

1 ATR/QM FAQ DISCLAIMER: The following questions and answers are to be used as a guide and do not constitute legal or regulatory advice. Information provided may change based on staff, investor, agency, outside counsel and/or CFPB guidance or revisions. 1) Q: Is Platinum s Underwriting Fee included in the 3% QM points & fees limit A: Yes, if paid by the consumer on a brokered transaction, it is included per (b)(1)(i) in the calculation since it is a prepaid finance charge retained by the creditor. However, it is not included if the fee is paid by the seller or creditor through higher rate (via either excess rate credit or locking as no fee option with adjustment), since it would no longer be considered a prepaid finance charge. 2) Q: Is broker compensation included in the 3% QM points and fees limit calculation even if it is paid by the lender or seller? A: Yes, per (b)(1)(ii), all compensation paid directly or indirectly to a loan originator is included, regardless of who it is paid by. 3) Q: Is originator compensation paid to an individual loan originator (i.e., loan officer) included in the 3% QM points and fees limit A: No, per (b)(1)(ii)(B-C), compensation paid to an individual originator that is an employee of the creditor or broker is not included. 4) Q: If both the broker compensation on a lender paid transaction and Platinum s Underwriting Fee is included in the 3% QM points & fees limit calculation, then won t all my loans fail the test? A: Yes, if the sum of the selected comp plan amount and the Underwriting Fee exceed the limit. This is why we advise brokers to carefully consider different loan scenarios prior to selecting their comp plan percentage. Note that rate credit above the broker s comp plan can be used to pay for Platinum s Underwriting Fee, or the loan can be locked as a No Fee option (subject to pricing adjustment), or the seller can pay this fee in order to exclude from the test. 5) Q: Are all seller paid items excluded from the 3% QM points & fees limit A: Only items that would otherwise be included as a prepaid finance charge under (b)(1)(i) and are not included in a different section of the reg are Page1

2 excluded if paid by the seller. For example, while Platinum s Underwriting Fee would be excluded if seller paid, broker compensation is included regardless of who pays it under (b)(1)(ii), and certain creditor affiliate items are included regardless of who pays them under (b)(1)(iii). 6) Q: What options do we have if a loan fails the QM test? A: Platinum will not close or fund a loan that fails the 3% QM points and fees limit calculation. Therefore, options to resolve this prior to closing may include: Broker reducing compensation on consumer paid broker transactions, correspondent reducing fees on a correspondent transactions. If the loan initially fails the test at setup, an opportunity to make an adjustment (i.e. changing to lender or borrower paid, reduce fees) may be allowed in order to comply with the test. 7) Q: Is Lender Paid MI included in the 3% QM points & fees limit A: No, because it is not a prepaid finance charge since it is paid by the creditor and is not included in (b)(1)(ii-vi). 8) Q: If a broker locks and submits a loan in December, but that loan doesn't close until January 20 th, will it be subject to the 3% QM points & fees limit A: No, because the creditor (Platinum) received the loan application prior to the January 10, 2014 effective date of the new ATR/QM Rule. We are clarifying how applications will be treated if they are taken by the broker in December but not submitted until on/after the effective date. 9) Q: If a correspondent receives an application in December but it is not submitted to Platinum until after the January 10, 2014 effective date, will it be subject to the 3% QM points & fees limit A: No, because the creditor (Correspondent) received the application prior to the January 10, 2014 effective date of the new ATR/QM Rule. Platinum will carefully examine the loan documentation to determine that sufficient evidence exists that the application was taken prior to the effective date, including but not limited to dates by borrowers and LO on the 1003, date of credit report and dates of other disclosures. 10) Q: If the QM points and fees limit is 3%, then why is Platinum Mortgage capping broker comp plans at 2.75%? A: Because of the way the limit is calculated, a 3% comp plan will nearly always fail the 3% QM points % fees limit calculation. For example: Case Study This is an actual loan that closed with Platinum Mortgage. It is a USDA purchase brokered transaction. The purchase price is $132,500 and the loan amount is $135,204. First, we calculate the total loan amount under the QM rule for this transaction: Page2

3 Take the amount financed on the TIL, and subtract any financed creditor affiliate items that are not prepaid finance charges. In the interest of simplicity, the amount financed is used for this example and it is $130, (Note that any prepayment penalty or financed premiums for credit life, disability or unemployment insurance for the new loan would also be subtracted from the amount financed along with any financed creditor affiliate fees that are not prepaid finance charges to determine total loan amount). Next, we determine the limit on points and fees for this transaction: The fees threshold is based on the note amount. The loan amount of $135,204 puts this loan in the 3% category for limitation. Next we apply the percentage of limitation to the total loan amount calculated in the first step above, which means $130, X 3% or a limit on points and fees of $3, Finally, we add up the points and fees for the transaction (including broker compensation paid by lender) and compare to the limit. Lender Paid Compensation is based on the note amount. If the broker had a 3% comp plan in this scenario, $135,204 X 3% equals $4,056.12, which exceeds the points and fees limitation based on the total loan amount as specified under the QM rule. This means a broker comp plan of 3% will fail to pass the test for this loan, even if no other fees exist that must be included. 11) Q: Will the Debt Ratio for all loans be limited to 43% under the new ATR/QM Rule? A: Due to the temporary exemptions in the regulation at this time, eligible FHA, VA, USDA and Fannie/Freddie Conventional loans are not subject to the 43% limitation on debt ratio in order to be eligible as a QM (but must still comply with the points and fees limit). This means that current products offered by Platinum are unaffected. However, this does not mean that any program with more restrictive debt ratio guidelines will be increased (i.e., VA manual underwrite debt ratio limits will remain 41% per VA guidelines). 12) Q: Can we select a different compensation plan for different loan amounts? A: No, at this time Platinum will not allow lender paid comp to vary based on different loan amount tiers. 13) Q: Is a 3 rd party company processing fee included in QM points & fees limit A: No, as long as it is not retained in whole or part by the creditor, originator or an affiliate of either. 14) Q: Will an FHA Streamline or VA IRRRL with no income documentation still qualify under the ATR rule? A: Yes, per (e)(4)(ii)(B-C), any loan eligible to be insured by HUD (FHA) or guaranteed by VA is considered a QM and complies with ATR requirements. Page3

4 15) Q: On Correspondent transactions, is the SRP included in the QM points & fees limit A: No, since SRP is paid (or charged if negative) as a separate transaction that occurs apart from closing to the correspondent acting as the creditor in whose name the loan documents closed and funded the transaction at closing with their own source of funds, it is considered a secondary market transaction gain or loss. 16) Q: Will Platinum calculate income in accordance with Appendix Q? A: Platinum Mortgage currently only offers loans that meet the temporary exemption from certain ATR standards per (e)(4)(ii). As such, Platinum Mortgage will continue to document these loans in accordance with agency (i.e., Fannie, FHA, VA, USDA) requirements, including any Platinum Mortgage overlays. 17) Q: When refinancing an FHA loan and the payoff includes a full month interest, is this considered a prepayment penalty that would be included in the QM points & fees limit A: No, per (b)(6), FHA monthly interest accrual is not considered a prepayment penalty. 18) Q: Does the ATR/QM rules and points and fees limit apply to 2 nd homes and investment properties? A: Yes, Per (a), it applies to any transaction secured by a dwelling, which is defined in (a)(19) as any residential structure that contains 1-4 units. Further commentary to (a)(19) clarifies that second and/or vacation homes may be included. Further, due to secondary investor requirements and since not all investment property loans are for business/investment purposes (some are non-owner occupied transactions that cannot fit into the agency definition of primary residence or second home), Platinum Mortgage will impose these rules on all transactions at this time. 19) Q: Are LLPA s included in QM points & fees limit A: No, not typically. For brokered transactions, LLPA s (loan level price adjustments) are all adjustments that are made to the base rate sheet price that results in the final adjusted price to consumer on the Platinum wholesale rate sheet. Since the final adjusted price is either credited to the consumer or charged in the form of discount, and LLPA s are not separately and individually charged directly to the consumer, LLPA s will not be included in the QM points & fees calculation for Platinum loans. However, note that if a loan s final adjusted price results in discount charged, it must meet the criteria to be eligible for exclusion of discount points. 20) Q: Are various fees such as HELOC close-out fees, recapture of closing costs, on a loan payoff considered a prepayment penalty that must be included in QM points & fees limit A: Per (b)(6)(ii), HELOC close out fees are considered a prepayment penalty unless the charge is recovery of bona fide third party charges imposed by the creditor if the HELOC is paid and closed within 36 months after account opening. HOWEVER, in addition, in order for this charge to be included in the QM points & fees, the creditor on the new loan must be the same as the creditor for the existing HELOC being paid off that includes items considered a prepayment penalty. Page4

5 21) Q: Can fees charged by the creditor on a correspondent transaction exceed 2.75%? A: No, the total points and fees for the loan, including all creditor fees paid by the consumer as well as affiliate or other items that must be included, may not exceed 3% or the limit applicable under the QM points & fees limit. Charging greater than 2.75% is unlikely to result in a compliant loan for the same reason discussed in question number 10 above. If a correspondent loan is determined to fail to comply with the QM points & fees limit calculation, then the correspondent will be required to reduce fees in order to comply. Page5