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#1774637 - 01/10/13 03:00 PM
Ability to Repay Rules
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Diamond Poster
Joined: Sep 2008
Posts: 2,474
Midwest
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#1774701 - 01/10/13 03:48 PM
Re: Ability to Repay Rules
ahkcompliance
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Posts: 20,654
The Swamp
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Richard Cordray's prepared remarks struck me as a bit misleading...Please tell me how ATR is helpful in the following sitch? I guess he's implying that the market needs to pick up, but I don't see how any of this is supposed to free up lending. In contrast, consider these more recent situations. Anthony from New York contacted us earlier this year to describe how after years of building a strong credit report, he now finds that even with a solid credit score and money saved for a substantial down payment, he cannot get approved for a mortgage. After all those years of carefully managing his money, he has found that the current market has become so tight that he cannot get the approval he needs. And the slowdown in the mortgage market is holding back consumers in other ways too. We heard from a couple in Michigan who have credit scores in the 800s and simply want to refinance their home, which is now worth much more than the original mortgage loan, at the current lower rates. Yet they cannot get approved because there were no comparable sales in their neighborhood over the last twelve months.
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#1774725 - 01/10/13 04:02 PM
Re: Ability to Repay Rules
ahkcompliance
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Posts: 34,318
under the Lone Star
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Inflation will take care of everything! He can thank the Fed for that!
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#1774728 - 01/10/13 04:06 PM
Re: Ability to Repay Rules
ahkcompliance
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Power Poster
Joined: Nov 2001
Posts: 7,983
FINALLY ABOVE the gnat line
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I've yet to find the ACTUAL Regulation on their site. They have the summary and fact sheet.
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My Opinion Only.
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#1774732 - 01/10/13 04:08 PM
Re: Ability to Repay Rules
ahkcompliance
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Power Poster
Joined: Aug 2002
Posts: 3,094
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It's not there yet
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#1774750 - 01/10/13 04:31 PM
Re: Ability to Repay Rules
ahou
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Gold Star
Joined: Dec 2006
Posts: 435
TN
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It will be interesting to see how long it takes them to post it. After their rule on rulemaking that was recently released, we know the "official" date is the earlier of when something is posted on their website or it's printed in the Federal Register.
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#1774792 - 01/10/13 05:09 PM
Re: Ability to Repay Rules
straw
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Power Poster
Joined: Nov 2003
Posts: 3,726
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scuttlebut is reg will be posted at end of day, after news cycle, so the CFPB spin is out there before anyone sees actual reg. This has the hair on the back of my neck up, since my first thought is there must be something in the actual rule that they are spinning more positively than it really is. I think you are right. My mortgage lenders are looking at this as nothing new. "We already verify income and require 43% DTI, etc." I am saying hang on until we have the actual regulation. We don't know how we are to calculate DTI or verify information yet.
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#1774812 - 01/10/13 05:23 PM
Re: Ability to Repay Rules
Tesla
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100 Club
Joined: Mar 2004
Posts: 223
Minnesota
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I'm still concerned about the balloon loan section. We are a small community bank in a metro area (so we don't meet the "rural/underserved area" exemption). We very, very rarely make consumer home purchase loans. We do however make home equity term loans which are usually 2nd liens - oftentimes they are made to term out a HELOC. I'm not seeing where 2nd liens are exempt from the whole thing (I'm only seeing open-end credit, reverse mortgages, temporary loans). These loans are all balloon loans with a 15 or 20 year am with a 1 - 5 year balloon depending on the facts of the loan.
Am I looking at this all wrong? Or am I reading it correctly - that if I were to continue making these closed-end, consumer real estate loans with balloons, then I would NOT have a qualified mortgage nor a safe harbor?
From everything I've read, banks are not going to want to originate non-qualified mortgages without any protections down the road. We don't charge very high rates (sometimes we trip teh HPML trigger but usually not by too much) and don't charge any type of origination fees. These loans are made and stay in-house.
If my thinking is correct, I WILL be submitting a comment - to hopefully sway this "community bank" exemption decision - whenever that "proposal" comes out and tells me where to send comments.
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#1774833 - 01/10/13 05:48 PM
Re: Ability to Repay Rules
ahkcompliance
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Power Poster
Joined: Oct 2009
Posts: 9,088
OK
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I guess the posting of the rule will also have the effective date? Haven't seen that either.
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#1774838 - 01/10/13 05:51 PM
Re: Ability to Repay Rules
raitchjay
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Gold Star
Joined: Dec 2006
Posts: 435
TN
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#1774839 - 01/10/13 05:52 PM
Re: Ability to Repay Rules
ahkcompliance
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Joined: Nov 2002
Posts: 20,654
The Swamp
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I saw Jan 2014 in one of the CFPB 'public notices/discussions' which would make sense.
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#1774842 - 01/10/13 05:55 PM
Re: Ability to Repay Rules
ahkcompliance
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Power Poster
Joined: Oct 2009
Posts: 9,088
OK
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Ok...thanks.
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#1774881 - 01/10/13 06:44 PM
Re: Ability to Repay Rules
ahkcompliance
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Diamond Poster
Joined: Sep 2008
Posts: 2,474
Midwest
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I too am curious to see how the balloon payments work out. I would like to see the list of areas classified as rural and underserved.
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#1774891 - 01/10/13 06:52 PM
Re: Ability to Repay Rules
Sewanee, CRCM
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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That conforms to the Dodd-Frank/MRAPLA requirement that the effective date must be no more than one year after the date the final rule is issued.
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#1774930 - 01/10/13 07:24 PM
Re: Ability to Repay Rules
travelgirl
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Joined: Aug 2012
Posts: 1,700
48.934476, -114.343735
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I'm with travelgirl. Her scenario mimics what my bank does. If we use prudent underwriting, can we still make the balloon note? Even if it is not a QM, we can still make the loan with prudent underwriting? Correct? I say if we do our due diligence in writing the loan, let the customer take us to court.
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#1774953 - 01/10/13 07:53 PM
Re: Ability to Repay Rules
Oursisnottoreasonwhy
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Diamond Poster
Joined: Aug 2012
Posts: 1,700
48.934476, -114.343735
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I read that. But what if I'm not in a rural area. We are in a metro. We are a community bank. Am I allowed to make a non QM mortgage loan with a balloon? I'm thinking yes.
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#1774975 - 01/10/13 08:21 PM
Re: Ability to Repay Rules
ahkcompliance
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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You can make them, but a borrower may assert a violation of the ability-to-repay requirements as a defense to foreclosure which will make these even more expensive to collect and there is no time limit on the defense.
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#1774980 - 01/10/13 08:25 PM
Re: Ability to Repay Rules
rlcarey
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Diamond Poster
Joined: Aug 2012
Posts: 1,700
48.934476, -114.343735
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Thanks Randy. What prevents a borrower from contesting a foreclosure now? I don't recall any type of safe harbor available to balloon notes or hpmls at the moment. If we can prove that the note was underwritten properly, to a then qualified borrower, do we not have a defense?
I haven't been in the game as long as some though so please correct me if I'm wrong.
Last edited by Garret01; 01/10/13 08:25 PM.
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Maybe you just wanna fly the plane yourself. Well good luck pressing take off, then auto pilot, then land.
CRCM
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#1774981 - 01/10/13 08:26 PM
Re: Ability to Repay Rules
Norman Paperman
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Platinum Poster
Joined: Feb 2010
Posts: 960
Illinois
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I'm with travelgirl. Her scenario mimics what my bank does. If we use prudent underwriting, can we still make the balloon note? Even if it is not a QM, we can still make the loan with prudent underwriting? Correct? I say if we do our due diligence in writing the loan, let the customer take us to court. If you recall the proposed rule (since all we have of the final is press release), you have to demonstrate that the customer can make all of the payments, including the balloon, out of income or other resources, without sale of the collateral. If your prudent underwriting shows that your borrower has the cash to make the final payment on a 12 month balloon, then go ahead. Otherwise, you'll have a tough day in court.
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#1774989 - 01/10/13 08:36 PM
Re: Ability to Repay Rules
MyBrainHurts
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Diamond Poster
Joined: Aug 2012
Posts: 1,700
48.934476, -114.343735
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Works for me. We only write these large, short term balloons to customers with hight net worth and low dti/ltv.
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Maybe you just wanna fly the plane yourself. Well good luck pressing take off, then auto pilot, then land.
CRCM
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