Our bank meets the small creditor qualification standards (size & # of loans). Is it true then that some of our loans can be classified as Small Creditor QMs (if they meet the requirements & are not sold) while the loans that we sell would not be Small Creditor QMs? In other words, if a bank qualifies as a small creditor, is each loan separately evaluated for Small Creditor QM status? Or does the fact that we sell most loans disqualify all loans from Small Credit QM status?

If you sell your loans, except to other qualifying small creditors, you lose the small credit exemption, i.e. if you sell a QM in 2ndary market, you lose the exemption. You can sell the QMs to XYZ Bank which is also a small creditor Bank and retain the SC exemption.

But is that considered on a loan by loan basis?

I am a little confused as to the loan by loan question. As far as I know there is no loan by loan basis. If you sell one loan or 50 loans in 2ndary market transaction you lose the exemption. There is no threshold that I am aware of.
If you are claiming exemption as a small creditor and make a QM loan, it cannot be sold in 2ndary market for 3 years.

I believe that for small creditor, you can account on a loan by loan basis. For it to be considered a Small Creditor QM, you have to either retain it in portfolio for 3 years, or sell to another small creditor. But I think even if it doesn't meet that, it can be written to another QM standard.

I know that small servicer is an all or nothing proposition, maybe that is the confusion.

Thank you, Comply Wren. That's what we finally settled on too. I was looking for confirmation that we weren't out in left field.

See the guide at the top of this forum, starting at page 30 for a clearer understanding. Must read several times!!

The way I understand it is yes, it is on a loan by loan basis. For the ease of explanation, if you qualify as a "small creditor" based on asset size and number of loans, you can originate General QMs and you can originate Small Creditor QMs (I realize that there are other QMs). What the rule says is that if you sell the Small Creditor QM that you originate (which the GSEs won't buy anyway), unless it meets one of the following criteria, it is no longer considered a QM, so the safe harbor goes away:

It is sold more than three years after consummation.

It is sold to another creditor that meets the criteria
regarding number of originations and asset size, at any time.

It is sold pursuant to a supervisory action or agreement, at any time.

It is transferred as part of a merger or acquisition of or by the creditor, at any time

You can originate General QMs and sell them to the GSEs, even if you are a small creditor.

Thank you all for your insight.

Both the safe harbor (for non-HPCTs) and the rebuttable presumptions of compliance (for HPCTs) go away (but only with respect to the loans sold outside the exceptions noted), and the loan thus becomes less marketable until its third anniversary because it would have to be defended if a consumer suit is brought based on the ATR parameters in 1026.43(c).

JOhn, excuse my confusion...but what is an HPCT? As opposed, I guess, to an HPML?

"Higher-priced covered transaction".....if you're a small creditor, that's 3.5 points over the APOR as opposed to just 1.5 for an HPML (first lien).

Oh..geez...not enough coffee yet. Too many acronyms! Thanks, Raitch!

This lender will receive QM status either via small creditor or transitional, assuming loans are sold to Fannie or Freddie or another small creditor.... or am I missing something?