#1813100 - 05/10/13 03:17 PM
Re: Not a QM and doesn't meet the ATR
Anonymous
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Anonymous
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What are the repercussions if we go ahead and renew/refinance a loan after the January 2014 cutoff date that does not qualifiy or meet the ATR? I havene't read anything that gives us this information.
We have loans (balloon Loans) on the books now that are paying fine but may not meet the new standards. Now what? Are we suppose to all of sudden foreclose on loans that have been performing fine? I feel like I'm on a merry-go-round ... I'm so confused. OK so if we have a 1-4 balloon on the books now that will mature after the January cutoff date what can we do with it if it does not fall within the QM ... does it meet the ability to repay if we refinance it into an ARM and fix the rate for the first 61 payments? If not what can we do with them? Are you saying we can renew/refi even if they do not meet either (QM or ATR)... I need a new job the more I read the more I'm confused.
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#1813117 - 05/10/13 03:33 PM
Re: Not a QM and doesn't meet the ATR
Anonymous
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Gold Star
Joined: Jul 2012
Posts: 460
Greater Boston Area
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Since you are not a small creditor operating predominantly in a rural or underserved area, if you refinance into another balloon loan, it cannot be a qualified mortgage. To meet the ability to repay requirements, then, you must underwrite the loan using, at a minimum, the 8 criteria defined in the rule. As long as you underwrite to the ATR requirements, you are fine.
Here are the ways you can comply with the ATR rule: 1. Consider the minimum 8 underwriting criteria. 2. Originate a QM (can be traditional QM, temporary QM that simply qualifies for guarantee, insurance, or purchase by GSEs or other named Federal agencies, or the small creditor balloon QM). 3. Refinance a non-standard mortgage into a standard mortgage.
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#1813129 - 05/10/13 03:44 PM
Re: Not a QM and doesn't meet the ATR
Anonymous
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Power Poster
Joined: Apr 2005
Posts: 3,663
TN
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1026.43(c)(5)(A)A creditor must make the consideration required under paragraph (c)(2)(iii) of this section for:
(2) The maximum payment in the payment schedule, including any balloon payment, for a higher-priced covered transaction;
Joker, I'm not sure how that is not proof enough. It may not be what they intended, but it's what they said. They didn't say otherwise.
FWIW, I do hope that they didn't intend it that way and that they will come out and change it, BUT as it is written right now, I think it is pretty clear that you have to include the balloon in the payment calculation....not just consider it.
Last edited by Dani York, CRCM; 05/10/13 03:44 PM.
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#1813135 - 05/10/13 03:48 PM
Re: Not a QM and doesn't meet the ATR
Anonymous
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Power Poster
Joined: Apr 2005
Posts: 3,663
TN
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What are the repercussions if we go ahead and renew/refinance a loan after the January 2014 cutoff date that does not qualifiy or meet the ATR? I havene't read anything that gives us this information.
We have loans (balloon Loans) on the books now that are paying fine but may not meet the new standards. Now what? Are we suppose to all of sudden foreclose on loans that have been performing fine? As originally ask... what do we do if we are not a small creditor, it will not fall within the QM and will not meet the ATR but are currently paying fine... What do we do ? I understand it will not be a QM. Do we just have to foreclose on a performing loan? ATR is just the bank setting underwriting standards and getting verifications of income. Do you have a DTI benchmark? Do you (will you) get copies of paystubs, tax returns, etc)? If you do and your customer meets your benchmark DTI, you will be fine. You may need to tweak the terms on the loan in order to meet the DTI benchmark (dependent on if you are doing a balloon), but as long as you are actually underwriting the loan using documentary evidence and meet your underwriting standards you should be fine.
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I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.
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#1813137 - 05/10/13 03:50 PM
Re: Not a QM and doesn't meet the ATR
Anonymous
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Power Poster
Joined: Apr 2005
Posts: 3,663
TN
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1026.43(c)(5)(A)A creditor must make the consideration required under paragraph (c)(2)(iii) of this section for:
(2) The maximum payment in the payment schedule, including any balloon payment, for a higher-priced covered transaction;
Joker, I'm not sure how that is not proof enough. It may not be what they intended, but it's what they said. They didn't say otherwise.
FWIW, I do hope that they didn't intend it that way and that they will come out and change it, BUT as it is written right now, I think it is pretty clear that you have to include the balloon in the payment calculation....not just consider it. Are they only saying we have to include the Balloon amount if it will be a HPML? Sort of. Non-HPML says this (1) The maximum payment scheduled during the first five years after the date on which the first regular periodic payment will be due for a loan that is not a higher-priced covered transaction If the balloon occurs anytime between origination and month 61, you have to include the balloon. If the balloon occurs in month 62 or later, then you don't.
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I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.
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