BANKERS COMPLIANCE CONSULTING Small Creditor Revisions ATR & QM Requirements 1 I. Purpose Page 1 2
II. Definitions Page 1 3 III. ATR, QM & HPML Page 2 4
Page 2 1. TILA Small Creditor Designations 5 i. Portfolio QM Small Creditor Page 2 Asset Test + Loan Volume Test = Portfolio QM Small Creditor 6
Page 2 ii. Balloon Payment QM Small Creditor Asset Test + Loan Volume Test + Rural & Underserved Area Test = Balloon Payment QM Small Creditor 7 Page 2 iii. HPML Escrow Small Creditor Asset Test + Loan Volume Test + Rural & Underserved Area Test + Maintain Escrow Account Test = HPML Escrow Small Creditor 8
b. Small Creditor Criteria Test Page 3 9 c. Transition Period Page 4 10
What questions do you have? 11 2. Points and Fees Page 5-7 What s In? What s Out? 12
B. Ability To Repay Page 8 13 www.bankerscompliance.com 800-847-1653 Civil Liability Risk Loan Product Requirements Loan Product Prohibitions Minimum Underwriting Factors Repayment Ability Risk & Requirements Matrix Non-Qualified Mortgage Standard QM Special QM HUD (FHA) QM VA QM Small Creditor Portfolio QM "Conclusive" Safe Harbor (Non-HPML Loans) HUD (FHA) "Conclusive" Safe Harbor (APOR/APR Spread Annual MIP + 1.15%) VA "Conclusive" Safe Harbor "Conclusive" Safe Harbor (1st Lien HPML Rate Spread < 3.5%) "Rebuttable" Presumption of Compliance Safe Harbor (HPML Loans) HUD (FHA) "Rebuttable" Presumption of Compliance (APOR/APR Spread > Annual MIP + 1.15%) VA Interest Rate Reduction Refinance Loan (Some IRRRL's) "Rebuttable" Presumption of Compliance No Safe Harbor For Use On or Amer 3/31/16 Loan Points & Fees Do Not Exceed Threshold* Equal Periodic Payments 1 30 Year Maximum Loan Term 5 Year Minimum Loan Term Balloon Payment ** Interest Rate Increase Negative Amortization Deferred Principal Payment Post Consummation Transfer 2 2 Appendix Q Standards Income and/or Assets 3 Employment Status Monthly Loan Payment Monthly Simultaneous Loan Payment Monthly Mortgage Related Obligations/Payments Current Debt Obligations Debt To Income Ratio and/or Residual Income 4 Credit History Government Program Eligible 5 Qualified Mortgages (QM) Small Creditor Balloon Payment QM Version 4.1 4/1/16 *Points & Fees Threshold: Loans $101,749 = 3% Loans $61,050 but < $101,749 = $3,052 Loans $20,350 but < $61,050 = 5% Loans $12,719 but < $20,350 = $1,017 Loans < $12,719 = 8% 1 - Other than the balloon payment. **Any non-qm balloon payment due within 60 months amer the first payment due date must be considered to determine repayment ability. Higher Priced Mortgage Loans must consider any balloon payment. 2 - These loans generally cannot be transferred within the first three years other than to another creditor whom also meets the applicable QM creditor qualificaoons. 3 - Determine that the consumer can make all scheduled payments other than the balloon payment from current or reasonably expected income and/or assets. Page 9 Underwriting Verification 3rd Party Documentation 4 - Total "back end" debt to income raoo cannot exceed 43%. 5 - Loan conforms to Fannie Mae/ Freddie Mac standards or is confirmed "eligible" by either Desktop Underwriter or Loan Prospector. Small Creditor PorOolio QM Bank Criteria: A bank must meet all of the following: Ø On the preceding December 31st* the bank combined with any mortgage-lending affiliates had assets of less than the threshold in 12 CFR 1026.35(b)(2)(iii)(C). Ø In the preceding calendar year* the bank and any affiliates made no more than 2,000 consumer purpose, closed end, first lien, dwelling secured loans that were sold, assigned or transferred. Do not include any loans held in porrolio. Small Creditor Balloon Payment QM Bank Criteria: A bank must meet all of the following: Ø On the preceding December 31st* the bank combined with any mortgage-lending affiliates had assets of less than the threshold in 12 CFR 1026.35(b)(2)(iii)(C). Ø In the preceding calendar year* the bank and any affiliates made no more than 2,000 consumer purpose, closed end, first lien, dwelling secured loans that were sold, assigned or transferred. Do not include any loans held in porrolio. Ø In the preceding calendar year* the bank made at least one consumer purpose, closed end, first lien, dwelling secured loan where the property is located in an area that is rural or underserved. *Extended to either of the two preceding calendar years if the applicaoon was received before April 1st of the current calendar year 14 Important Note: This matrix is not inclusive of every detailed requirement. Consult 12 CFR 1026.35 and 1026.43 for further details.
2. Risk Management Page 10 Qualified Mortgage vs. Non-Qualified Mortgage 15 Page 10-13 www.bankerscompliance.com 800-847-1653 Civil Liability Risk Repayment Ability Risk & Requirements Matrix Standard QM Non-Qualified Mortgage Special QM VA QM HUD (FHA) QM "Conclusive" Safe Harbor (Non-HPML Loans) HUD (FHA) "Conclusive" Safe Harbor (APOR/APR Spread Annual MIP + 1.15%) VA "Conclusive" Safe Harbor "Conclusive" Safe Harbor (1st Lien HPML Rate Spread < 3.5%) "Rebuttable" Presumption of Compliance Safe Harbor (HPML Loans) HUD (FHA) "Rebuttable" Presumption of Compliance (APOR/APR Spread > Annual MIP + 1.15%) VA Interest Rate Reduction Refinance Loan (Some IRRRL's) "Rebuttable" Presumption of Compliance No Safe Harbor For Use On or Amer 3/31/16 Qualified Mortgages (QM) Small Creditor Portfolio QM Small Creditor Balloon Payment QM Version 4.1 4/1/16 *Points & Fees Threshold: Loans $101,749 = 3% Loans $61,050 but < $101,74 Loans $20,350 but < $61,050 Loans $12,719 but < $20,350 Loans < $12,719 = 8% 16
What questions do you have? 17 www.bankerscompliance.com 800-847-1653 Civil Liability Risk Loan Product Requirements Loan Product Prohibitions Minimum Underwriting Factors Repayment Ability Risk & Requirements Matrix Non-Qualified Mortgage Standard QM Special QM HUD (FHA) QM VA QM Small Creditor Portfolio QM "Conclusive" Safe Harbor (Non-HPML Loans) HUD (FHA) "Conclusive" Safe Harbor (APOR/APR Spread Annual MIP + 1.15%) VA "Conclusive" Safe Harbor "Conclusive" Safe Harbor (1st Lien HPML Rate Spread < 3.5%) "Rebuttable" Presumption of Compliance Safe Harbor (HPML Loans) HUD (FHA) "Rebuttable" Presumption of Compliance (APOR/APR Spread > Annual MIP + 1.15%) VA Interest Rate Reduction Refinance Loan (Some IRRRL's) "Rebuttable" Presumption of Compliance No Safe Harbor For Use On or Amer 3/31/16 Loan Points & Fees Do Not Exceed Threshold* Equal Periodic Payments 1 30 Year Maximum Loan Term 5 Year Minimum Loan Term Balloon Payment ** Interest Rate Increase Negative Amortization Deferred Principal Payment Post Consummation Transfer 2 2 Appendix Q Standards Income and/or Assets 3 Employment Status Monthly Loan Payment Monthly Simultaneous Loan Payment Monthly Mortgage Related Obligations/Payments Current Debt Obligations Debt To Income Ratio and/or Residual Income 4 Credit History Government Program Eligible 5 Qualified Mortgages (QM) Small Creditor Balloon Payment QM Version 4.1 4/1/16 *Points & Fees Threshold: Loans $101,749 = 3% Loans $61,050 but < $101,749 = $3,052 Loans $20,350 but < $61,050 = 5% Loans $12,719 but < $20,350 = $1,017 Loans < $12,719 = 8% 1 - Other than the balloon payment. **Any non-qm balloon payment due within 60 months amer the first payment due date must be considered to determine repayment ability. Higher Priced Mortgage Loans must consider any balloon payment. 2 - These loans generally cannot be transferred within the first three years other than to another creditor whom also meets the applicable QM creditor qualificaoons. 3 - Determine that the consumer can make all scheduled payments other than the balloon payment from current or reasonably expected income and/or assets. Page 14 Underwriting Verification 3rd Party Documentation 4 - Total "back end" debt to income raoo cannot exceed 43%. 5 - Loan conforms to Fannie Mae/ Freddie Mac standards or is confirmed "eligible" by either Desktop Underwriter or Loan Prospector. Small Creditor PorOolio QM Bank Criteria: A bank must meet all of the following: Ø On the preceding December 31st* the bank combined with any mortgage-lending affiliates had assets of less than the threshold in 12 CFR 1026.35(b)(2)(iii)(C). Ø In the preceding calendar year* the bank and any affiliates made no more than 2,000 consumer purpose, closed end, first lien, dwelling secured loans that were sold, assigned or transferred. Do not include any loans held in porrolio. Small Creditor Balloon Payment QM Bank Criteria: A bank must meet all of the following: Ø On the preceding December 31st* the bank combined with any mortgage-lending affiliates had assets of less than the threshold in 12 CFR 1026.35(b)(2)(iii)(C). Ø In the preceding calendar year* the bank and any affiliates made no more than 2,000 consumer purpose, closed end, first lien, dwelling secured loans that were sold, assigned or transferred. Do not include any loans held in porrolio. Ø In the preceding calendar year* the bank made at least one consumer purpose, closed end, first lien, dwelling secured loan where the property is located in an area that is rural or underserved. *Extended to either of the two preceding calendar years if the applicaoon was received before April 1st of the current calendar year 18 Important Note: This matrix is not inclusive of every detailed requirement. Consult 12 CFR 1026.35 and 1026.43 for further details.
Your Policy & Procedures Page 14 Is ATR & QM spelled out? 19 Page 14 Minimum Underwriting Factors 20
www.bankerscompliance.com 800-847-1653 Civil Liability Risk Loan Product Requirements Loan Product Prohibitions Minimum Underwriting Factors Underwriting Verification Special QM Non-Qualified Mortgage Standard QM HUD (FHA) QM "Conclusive" Safe Harbor (Non-HPML Loans) HUD (FHA) "Conclusive" Safe Harbor (APOR/APR Spread Annual MIP + 1.15%) VA "Conclusive" Safe Harbor "Conclusive" Safe Harbor (1st Lien HPML Rate Spread < 3.5%) "Rebuttable" Presumption of Compliance Safe Harbor (HPML Loans) HUD (FHA) "Rebuttable" Presumption of Compliance (APOR/APR Spread > Annual MIP + 1.15%) VA Interest Rate Reduction Refinance Loan (Some IRRRL's) "Rebuttable" Presumption of Compliance No Safe Harbor Loan Points & Fees Do Not Exceed Threshold* Equal Periodic Payments 1 30 Year Maximum Loan Term 5 Year Minimum Loan Term Balloon Payment ** Interest Rate Increase Negative Amortization Deferred Principal Payment Post Consummation Transfer 2 2 Appendix Q Standards Income and/or Assets 3 Employment Status Monthly Loan Payment Monthly Simultaneous Loan Payment Monthly Mortgage Related Obligations/Payments Current Debt Obligations Debt To Income Ratio and/or Residual Income 4 Credit History Government Program Eligible 5 Small Creditor PorOolio QM Bank Criteria: Repayment Ability Risk & Requirements Matrix For Use On or Amer 3/31/16 3rd Party Documentation Qualified Mortgages (QM) VA QM Small Creditor Portfolio QM Small Creditor Balloon Payment QM Version 4.1 4/1/16 *Points & Fees Threshold: Loans $101,749 = 3% Loans $61,050 but < $101,749 = $3,052 Loans $20,350 but < $61,050 = 5% Loans $12,719 but < $20,350 = $1,017 Loans < $12,719 = 8% 1 - Other than the balloon payment. **Any non-qm balloon payment due within 60 months amer the first payment due date must be considered to determine repayment ability. Higher Priced Mortgage Loans must consider any balloon payment. 2 - These loans generally cannot be transferred within the first three years other than to another creditor whom also meets the applicable QM creditor qualificaoons. 3 - Determine that the consumer can make all scheduled payments other than the balloon payment from current or reasonably expected income and/or assets. 4 - Total "back end" debt to income raoo cannot exceed 43%. 5 - Loan conforms to Fannie Mae/ Freddie Mac standards or is confirmed "eligible" by either Desktop Underwriter or Loan Prospector. Page 14 21 Page 31-32 h. Prepayment Penalty Provisions 22
5. Points & Fees QM Cure Page 33 23 What questions do you have? 24
Page 34 C. Higher Priced Mortgage Loans 25 2. Interest Rate Set Date Page 34 26
Page 35 27 6. HPML Escrow Accounts Page 37 28
b. HPML Escrow Exemptions Page 37 29 c. Cancellation Page 37 30
Page 38-39 7. HPML Appraisal Requirements 31 b. General HMPL Appraisal Page 40 32
c. Written Disclosure Page 40 We may order an appraisal to determine the property s value and charge you for this appraisal. We will give you a copy of any appraisal, even if your loan does not close. You can pay for an additional appraisal for your own use at your own cost. 33 d. Free Appraisal Copies Page 41 34
Page 41-43 e. Flippin Appraisal Requirement 35 What questions do you have? 36
Thank You! July 27 Audit Report Wri3ng Upcoming Webinars January 26 th Improving Employee Performance in Everyday Work Situations & Reviews July 27 Flood Insurance: Compliance Issues and Enforcement Topics that Con3nue to Plague Lenders January 27 th Home Equity Lines of Credit TTS Kyle Bennett 800-831-0678 info@ttstrain.com www.bankwebinars.com July 28 Compliance Perspec3ves: A Monthly Update January 27 th Best-Ever Compliance Checklists for Consumer Loans August 1 Bank Call Report Prepara3on for Beginners - Five Part Webinar January 28 th 20 Legal Account Ownerships, Titles, Sample Signature Cards and Legal Documentation August 2 UCC 3 and 4: Endorsements and Other Legal Check Issues January 28 th Compliance Perspectives: A Monthly Update August 3 Excel Explained: Filtering and FormaQng Data August 3 BSA for Lenders January 28 th Deliver Training that Sticks August 4 OverdraT Privilege - 10 Hot Spots February 2 nd Writing High Impact Executive Summaries February 3 rd Excel Explained: Internal Control August 4 12 Tricks that Make Training S3ck February 3 rd Call Report for Banks - Recent Changes, Highlights, and Pitfalls August 9 Vital Issues on Personal Accounts: 25 Customer Ques3ons and the Answers February 5 th BSA Series: Customer Due Diligence Preparing for the Change 37