7/3/2023 0 Comments Qm loans definition![]() General Requirement – “The documentation provision requires a creditor to retain documentation to show how it applied its written policies and procedures, and, to the extent it deviated from them, to further retain documentation of how the creditor nonetheless took into account the required factors.Final rule provides debt and income verification method safe harbors if following one of the CFPB’s preferred methods, but it is not required that the CFPB methods are followed so as to, “provides creditors with the flexibility to develop other methods of compliance with the verification requirements”. ![]() A creditor is to verify the consumer’s current or reasonably expected income or assets other than the value of the dwelling (including any real property attached to the dwelling) that secures the loan and the consumer’s current debt obligations, alimony, and child support.Rules remain on income and debt verification, but the rule removes Appendix Q.Note: There are important exceptions and additional rate-to-APOR thresholds for smaller balanced loans and specific provisions just for manufactured home loans that will be important to the manufactured housing industry, discussed in more detail below.Above 6.5% of APOR is a High-Cost Mortgage Loan.Above 2.25% but below 6.5% above APOR is a non-QM (but not a “High-Cost Mortgage Loan”).Rebuttable Presumption is therefore any loan with a rate between 1.5% - 2.25% above APOR.Safe Harbor cannot exceed APOR by more than 1.5%.Still two types of General QM – Safe Harbor and Rebuttable Presumption.“General QM” loan definition is now defined as a loan in which the, “annual percentage rate (APR) exceeds the average prime offer rate (APOR) for a comparable transaction by less than 2.25 percentage points as of the date the interest rate is set”.The DTI limit is replaced by “price-based thresholds” (justification for the change is laid out starting on page 37 and page 44, and says a bright line test is better and that loan pricing better reflects ability to repay considerations: “A loan’s price is not a direct measure of ability to repay, but the Bureau concludes that it is an effective indirect measure of ability to repay.”.No more 43% DTI required for QM underwriting (by your larger and institutional lenders, small creditor exempted lenders never had a hard 43% limit).The basic changes to QMs in the new rule are:
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