ATR/QM Points & Fees Broker FAQ s

Transcription

1 Q #1: Is Carrington s Underwriting Fee included in the 3% QM points & fees limit calculation? A: Yes, if paid by the consumer on a brokered transaction, it is included in the calculation because it is a prepaid finance charge retained by the creditor, per (b)(1)(i). However, it is not included if the fee is paid by the seller or if the loan is locked with a no Underwriting Fee option (subject to LLPA), since it would no longer be considered a prepaid finance charge. Q #2: 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 pays the fee. Q #3: Is originator compensation paid to an individual loan originator (i.e., loan officer) Included in the 3% QM points and fees limit calculation? 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. Q #4: If both the broker compensation on a lender paid transaction and Carrington s Underwriting Fee is included in the 3% QM points & fees limit calculation, then won t all my loans fail the test? A: This depends on the loan amount and the compensation plan selected by the broker. This is why we advise brokers to carefully consider different loan scenarios prior to selecting their comp plan percentage. Note that the loan can be locked using the no Underwriting Fee option (subject to LLPA), or the seller can pay this fee in order to exclude from the test. Q #5: Are all seller paid items excluded from the 3% QM points & fees limit calculation? 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 regulation are excluded if paid by the seller. For example, while Carrington 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). Q #6: What options do we have if a loan fails the QM test? A: Carrington 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 borrower paid broker transactions or switching to borrower paid broker compensation from lender paid compensation. Q #7: Is a 3 rd party company processing fee included in the QM points & fees limit calculation? A: No, as long as it is not retained in whole or part by the creditor, originator or an affiliate of either. This applies to both lender paid compensation and borrower paid compensation. Additional documentation will be required as part of the transaction. Q #8: Is Lender Paid MI included in the 3% QM points & fees limit calculation? A: No, because it is not a prepaid finance charge since it is paid by the creditor and is not included in (b)(1)(iivi). Copyright 2014 Carrington Mortgage Services, LLC. All rights reserved. Not to be duplicated or distributed Page 1 of 5

2 Q #9: If a broker locks and submits a loan in December, but that loan doesn't close until after January 10th, will it be subject to the 3% QM points & fees limit calculation? A: No, because Carrington received the loan applications prior to the January 10, 2014 effective date of the new ATR/QM Rule. For applications taken prior to January 10, 2014 but submitted to Carrington after the deadline, these loans will be subject to the 3% points and fees limit. The broker s compensation will be subject to the compensation plan in effect at the time the application was received by CMS. Q #10: If the QM points and fees limit is 3%, then why is Carrington 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 and fees limit calculation. The 3% points and fees test is calculated based on the amount financed, but the broker s compensation is calculated on the loan amount. Since these amounts are almost always different, a 2.75% compensation plan will bring the points and fees close to the 3% points and fees limit. Q #11: 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 calculation? A: No, per (b)(6), FHA monthly interest accrual is not considered a prepayment penalty. Q #12: Will lock extension or relock fees be counted against the points and fees limit calculation? A: No, Carrington will treat extension fees as LLPA s and they will follow the same process as outlined above. However, note that if a loan s final price results in a discount charged to the borrower, it must meet the criteria to be eligible for exclusion of discount points. Q #13: If my loan amount is under $100,000 will CMS follow the expanded points and fees thresholds for those loan amounts? A: Yes, CMS will follow the expanded points and fees thresholds allowed for in the 3% points and fees test as follows: $ $60,000 $3,000 in points and fees $59,999 - $20,000 5% in points and fees $19,999 - $12,500 $1,000 in points and fees Up to $12,499 8% in points and fees Q #14: Does the ATR/QM rules and points and fees limit apply to 2nd 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), Carrington will impose these rules on all transactions at this time. Q #15: Are LLPA s included in QM points & fees limit calculation? A: No, LLPA s are adjustments that are made to the base price and will be converted to rate through the Carrington pricing engine. Since LLPA s are not separately and individually charged directly to the consumer and they will be part of the rate, LLPA s will not be included in the QM points & fees calculation for Carrington Loans. However, note that if a loan s final price results in a discount charged to the borrower, it must meet the criteria to be eligible for exclusion of discount points. Copyright 2014 Carrington Mortgage Services, LLC. All rights reserved. Not to be duplicated or distributed Page 2 of 5

3 Q #16: Can bona fide discount points be excluded from the QM points-and-fees calculation? A: Yes, it must pass both the rate reduction and the comparison of the APOR to the undiscounted interest rate. CMS uses a 25 basis point per discount point as the basis for determining the rate reduction. The undiscounted interest rate will be compared to the APOR If the undiscounted interest rate is not able to cover all LLPA, the portion of the discount associated with the undiscounted interest rate cannot be excluded via a bona find discount calculation and will automatically be count in the QM points-and-fees test May exclude up to 2 discount points if the interest rate before discount does not exceed the APOR for a comparable transaction by more than 1 percentage point and may exclude up to 1 discount point for APOR comparable transaction by more than 2 percentage points Q #17: If the loan is re-priced to get under the QM Points and Fees; is this a valid change of circumstance? A: No. It is not a valid change of circumstance to reprice the loan. Q #18: Will you allow a manual underwrite on an FHA, VA, or RD loan if the ratios exceed 43% but meet the insurer s manual underwriting requirements? A: Yes, these loan types would fall under temporary QM and must be underwritten per their published guidelines. Q #19: LLPAs do we use the net or the gross? A: This will be built into Optimal Blue pricing engine. It will be the net number. Q #20: It appears CMS is holding to the 1% in points =.25% in rate, is this how CMS is handling pricing? A: FNMA previous guidance was 25 bpts per 1% in discount. FNMA has since removed this guidance. Consistent with Industry practices the test will utilize 25 bpts per 1% as one part of the Bona Fide Discount Calculation. To exclude any discount points it must still meet the other portion of the test, undiscounted rate and APOR. Q #21: Will we allow loans with a DU/LP approval to have a DTI over 43%? A: The DTI requirements for QM only come into play when dealing with our non-agency product line. For the GSE s, FHA, USDA and VA we do not have to meet the 43% DTI, but we must adhere to and underwrite per the appropriate published guidelines. Q #22: Where can I obtain a copy of the questionnaire each broker must complete concerning any affiliations they may have? A: Questionnaire can be found in our website CarringtonWholesale.com under Broker Center> Documents and Forms>Useful Forms. Copyright 2014 Carrington Mortgage Services, LLC. All rights reserved. Not to be duplicated or distributed Page 3 of 5

4 Q #23: 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 Q #24: If we use seller concessions to remove items from the 3% test (ie. discount points) can we provide an itemization of those funds signed by the borrower and seller prior to closing, but still continue to show them as a lump sum on the HUD? A: Seller credits may be utilized to offset certain fees, for example discount points that were not excluded via bona fide discount calculation and fees paid to an affiliate (with the exception of pre-payment penalties and broker compensation). To exclude these fees we would need a separate itemization and letter signed from the seller detailing what specifically the fee is paying. Seller concessions should be itemized on the HUD and shown paid by seller. Q #25: If a Broker is affiliated with an insurance agency, are hazard premiums paid to the insurance company when the Correspondent is the agent counted in the QM calculation? A: HOI was given a slight variance, it does not need to be counted as long as a Choice of Agent or Insurer disclosure is provided and the premium for the initial term is clearly disclosure. However, if the homeowner s insurance agency is an affiliate, then the portion of the fee retained by the affiliate would be counted in the QM points and fees. The split would need to be clearly defined to a transaction level and kept with the loan otherwise the entire amount would need to be counted in the QM points and fees. An Affiliated Business Agreement would need to be provided as well. Q #26: Affiliates Has CMS begun to research what brokers have affiliate relationships? How is CMS vetting that information and where is it being stored? Does CMS have any relationships that would fall into this category? A: The Broker approval department is gathering affiliated information from our approved clients. All affiliated processed from our broker approval department and added to the TPO database. CMS has an affiliation with Carrington Title Services, LLC & Carrington Escrow Inc. Q #27: 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 all loans must still comply with the points and fees limit. This means that current products offered by Carrington 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). Q #28: Will Carrington calculate income in accordance with Appendix Q? A: Carrington currently only offers loans that meet the temporary exemption from certain ATR standards per (e)(4)(ii). As such, Carrington will continue to document these loans in accordance with agency (i.e., Fannie, FHA, VA, USDA) requirements, including any Carrington overlays. Copyright 2014 Carrington Mortgage Services, LLC. All rights reserved. Not to be duplicated or distributed Page 4 of 5

5 Q #29: Are HPML loans QM eligible and will Carrington close them? A: Yes, currently under ATR/QM regulations, there are two categories of QM s safe harbor and rebuttable presumption of compliance. A loan which meets all the other requirements of QM standards, including a temporary exemption loan for sale to or insurance by Fannie/Freddie, USDA, VA or HUD, but that is considered a higher priced mortgage loan, falls under the rebuttable presumption of compliance category. Rebuttable Presumption loans will be subject to a minimum Residual Income test. At this time, Carrington will continue to close both categories of loans. Note that existing HPML requirements for an escrow account for taxes and insurance will still apply to these loans, as will any agency requirements, such as Fannie/Freddie s requirement to limit debt ratio to 45% for any HARP (i.e., DU Refi Plus) loan falling into the HPML category. Additionally, HUD has published their guidelines for Rebuttable Presumption loans and they are different then the guidelines for HPML. This means you could have a case where a loan is an HPML loan per Federal statute and a Safe Harbor QM loan per HUD. Federal HPML rules will still apply in this case. Q #30: Can we select a different compensation plan for different loan amounts? A: No, at this time Carrington will not allow lender paid comp to vary based on different loan amount tiers. Q #31: When will CMS put my new compensation plan into effect? Q #32: Do manual underwrites have the ability to exceed 43% DTI? A: We will follow the agencies guidelines for manual UW. Q #33: Are brokers required to show that they provided a list of homebuyer counseling locations to the borrower? A: We will provide the notice, optional for Broker. Q #34: Can my compensation plan vary between borrower paid and lender paid plans? A: It depends. CMS will not allow borrower paid compensation to exceed the lender paid compensation amount that you have selected in your compensation agreement. However, CMS will allow you borrower paid compensation to be less than your lender paid compensation. Q #35: The changes to the LO Compensation rules now permits a Broker/LO to contribute their commission for an unforeseen expense, will CMS allow this? A. At this time, CMS does not plan on allowing an LO or Broker to use part of their commission on lender paid transactions. CMS will allow the LO/Broker to credit part of their commission to the borrower on borrower paid transactions. A: All compensation plan changes received between 12/27/13 and 1/8/14 will become effective on 1/10/14 and apply to all loans received by CMS on or after 1/10/14 regardless of the date of the Copyright 2014 Carrington Mortgage Services, LLC. All rights reserved. Not to be duplicated or distributed Page 5 of 5