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#1835735 - 07/23/13 09:01 PM Qualified mortgage loans-balloon loans
dnau Offline
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Joined: Jul 2009
Posts: 93
I am reading page 29 of the CFPB Ability to Repay and Qualified Mortgage Rule dated April 10, 2013. My bank is not in the "rural" or "underserved" counties listed, BUT we are under $2Billion in assets AND originate under 500 first lien mtg loans per calendar year, so I believe my bank is considered small creditor so can my bank do 5 year balloon loans with full underwriting (less than 43%DTI)? would this be a safe harbor or no safe harbor QM loan presumption of compliance? We do not fund HPML loans.

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Ability to Repay/Qualified Mortgage Rule
#1835816 - 07/24/13 01:51 PM Re: Qualified mortgage loans-balloon loans dnau
MyKidsMom Offline
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I think this would be subject to safe harbor if the underwriting is done and its not an HPML. But, I'm needing clarification this as well. And, this is subject to the next 2 years and not a permanent option??

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#1836032 - 07/24/13 05:41 PM Re: Qualified mortgage loans-balloon loans dnau
ahkcompliance Offline
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Midwest
I don't think you would get the safe harbor. The small creditor qualified mortgage must meet the general QM requirements other than the 43% DTI. The QM general requirements specially state no balloon payment so I don't think you would get the safe harbor. I think you can only the safe harbor for a balloon loan under the Balloon Payment QM.

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#1836433 - 07/25/13 04:46 PM Re: Qualified mortgage loans-balloon loans dnau
MyKidsMom Offline
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Ok. Then to clarify. The only benefit of the small creditor temporary rule is that DTI is not limited to 43%??????

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#1836447 - 07/25/13 05:09 PM Re: Qualified mortgage loans-balloon loans dnau
What to Do Offline
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On this note of qualified mortgage loans-balloon loans, I am looking into the APOR, are the regulations indicating that loans under e(5) and e(6) that are not in rural or underserved areas are able to use the APOR of 3.5 for first liens and not be a high priced mortgage and be in safe harbor?

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#1836448 - 07/25/13 05:08 PM Re: Qualified mortgage loans-balloon loans dnau
Dani York, CRCM Offline
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(1) Safe harbor and presumption of compliance. (i) Safe harbor for transactions that are not higher-priced covered transactions. A creditor or assignee of a qualified mortgage, as defined in paragraphs (e)(2), (e)(4), (e)(5), (e)(6), or (f) of this section, that is not a higher-priced covered transaction, as defined in paragraph (b)(4) of this section, complies with the repayment ability requirements of paragraph (c) of this section.


(ii) Presumption of compliance for higher-priced covered transactions. (A) A creditor or assignee of a qualified mortgage, as defined in paragraphs (e)(2), (e)(4), (e)(5), (e)(6), or (f) of this section, that is a higher-priced covered transaction, as defined in paragraph (b)(4) of this section, is presumed to comply with the repayment ability requirements of paragraph (c) of this section.


Paragraph (e)(6) is the small creditor temporary balloon. If your bank qualifies for the small creditor QM and originates balloon loans in accordance with 1026.43(e)(6), you will have safe harbor for non-higher-priced covered transactions. For higher-priced covered transactions originated under (e)(6), you have a rebuttable presumption of compliance
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#1836450 - 07/25/13 05:10 PM Re: Qualified mortgage loans-balloon loans What to Do
Dani York, CRCM Offline
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Dani York, CRCM
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Originally Posted By: What to Do
On this note of qualified mortgage loans-balloon loans, I am looking into the APOR, are the regulations indicating that loans under e(5) and e(6) that are not in rural or underserved areas are able to use the APOR of 3.5 for first liens and not be a high priced mortgage and be in safe harbor?


For small creditor loans (including the temporary balloon QM under e6), you have the safe harbor for loans up to APOR plus 3.5. Anything over APOR plus 3.5 is a rebuttable presumption of compliance (provided you meet the requirements of the small creditor sections).
Last edited by Dani York, CRCM; 07/25/13 05:15 PM. Reason: clarify
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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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#1836462 - 07/25/13 05:23 PM Re: Qualified mortgage loans-balloon loans Dani York, CRCM
What to Do Offline
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Thank you just keep second quessing myself on reading these regulations.

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#1836463 - 07/25/13 05:23 PM Re: Qualified mortgage loans-balloon loans dnau
Diane Dean Offline
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Joined: Oct 2012
Posts: 92
As long as you otherwise meet the requirements in §1026.43(f) for the balloon payment QM's, I believe you would be eligible for the safe harbor on these loans.

Qualified mortgages. (1) Safe harbor and presumption of compliance. (i) Safe harbor for transactions that are not higher-priced covered transactions. A creditor or assignee of a qualified mortgage, as defined in paragraphs (e)(2), (e)(4), (e)(5), (e)(6), or (f) of this section, that is not a higher-priced covered transaction, as defined in paragraph (b)(4) of this section, complies with the repayment ability requirements of paragraph (c) of this section.

It sounds like you meet the creditor requirements and thus, under §1026.43(e)(6) would only then have to make sure you meet all of the QM balloon payment requirements under §1026.43(f), without regard to primarily serving rural or underserved counties.

This provision is temporary, however.
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#1836473 - 07/25/13 05:31 PM Re: Qualified mortgage loans-balloon loans dnau
ahkcompliance Offline
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Midwest
I forgot that provision. When the CFPB amended the final rule in early June to add the small creditor QM, it expanded the ability to make balloon payment Qm to small creditors as well. Small creditors that meet the BPQM requirements other than making 50% or more in rural or underserved may make balloon loan QM for two years.

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#1838670 - 08/01/13 08:08 PM Re: Qualified mortgage loans-balloon loans dnau
LA LA Offline
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Joined: Nov 2008
Posts: 38
For clarification purposes, I am with a small underserved creditor. I can have a QM balloon loan with an APR that is less than 3.5% over the APOR. Does this mean I still have an HPML loan for any 1st lien loans over the 1.50% and have to abide by the escrow rules or am I now allowed to go up to 3.5% for escrowing purposes?

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#1838671 - 08/01/13 08:12 PM Re: Qualified mortgage loans-balloon loans dnau
RR Joker Offline
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The Swamp
yes...it's still and HPML loan for all other purposes.
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