Is anyone creating QM-ATR specific adverse action notices when a loan is turned down because:

1. Exceeds points and fees.
2. Exceeds interest rate limit.
3. Income cannot be adequately documented under ATR requirements.

Thanks!

For #1, if you wanted to do the loan, you'd lower a big fee (like the origination fee), right?
For #2, rate too high? Lower it if you want to do the loan, all other things being acceptable (income, creditworthiness, etc.). [I'm interested in which rate ceiling you're considering, HPML vs. HOEPA]

For #3, it wll always be "Can't document income? Can't include it in DTI, so the Adverse reason is Excessive Obligations for the income that COULD be qualified."

I don't think your reasons will get written into the Reg's standard list of denial reasons.

I tend to agree with CB. Other than "unable to verify income", I see no viable reason for denial.

I see no way anyone is going to always make QM loans only...if you are worried about #1, I'd be looking at my fee structure for the breakdown. The whole point is to not be excessive with fees.

For # 2
I think I would have some potential concerns about lowering the rate on a specific deal to ensure it fits within the tolerances. Wouldn't you run into a fair lending issue if you're lowering the rate to one borrower (or a class of borrowers) in order to qualify the loan as QM? By lowering the rate to one borrower, you're in effect 'raising' the rate on another which may cause an unwanted matched pair. It seems like you might get into some disparate impact situations when analysis is done down the road if you can pinpoint a PBG that is adversely affected by this practice. And anymore, it just takes one to be a DOJ referral.

I know the regulators have stated that QM in and of itself should not cause fair lending concerns; but taking this a step further to lower the rate to ensure QM seems to be outside the boundries of that joint guidance.

To repurpose Joker's suggestion above, if your rates are throwing too many loans out of QM consideration, time to review your rate sheet as well.

Just my two cents... I've heard of this happening for years now to avoid HPML loans, but something that doesn't quite sit right with me. Maybe I'm paranoid but a fair lending accusation is something I don't want to mess around with!

Thanks, trout, now I won't be able to close EITHER eye to sleep at night: one side of my brain is working overtime looking for The Ghost of Structuring, now the other can look for the spectre of Disparate Impact who rattles the Fair Lending chains. One lending unit [my problem child] will not originate ANY QMs to keep in portfolio (another unit originates ONLY QMs to sell on 2ndary market).

I get your point about adjusting rates, and I'm still not certain whether the original posting was concerned simply with avoiding HPML rates, or Section 32/HOEPA rates. We just finished an FDIC exam where I spent an hour quizzing the primary examiner about structuring 1st and 2nds together, and about minor rate reductions to avoid HPML territory. She could not give me anything concrete, except to say these new rules weren't meant to restrict our lending, and following the guidelines shouldn't create Fair Lending issues.

I've done this successfully through FDIC exams...they had no problem with it...in fact, they more or less said..Oh...they keep just under HPML, so everything is a current market.

By doing this...we keep the rate decisions OUT of the LO's hands and in a controlled environment. Now what they DID have a problem with was a practice this bank originally had of lowering a fee to lower the APR...creating disparate fees from one loan to another.

Is it just me or does it seem like there's no way to win making mortgage loans anymore......?

Many smaller banks, if they didn't quit making them in 2010 with the RESPA changes, are quitting in 2014. The big boys that screwed up the industry win again. I equate it to Sarbanes-Oxley, where the accounting firms cause the mess and then got rich over the new legislation.

EXACTLY!!!!!!!!!!!

Score another for the Law of Unintended Consequences. Like how the private money remitters will now get more business because small banks and credit unions do not have the resources to deal with all of the new disclosures, error resolution, etc. on foreign remittances. And it was the private remitters that were the problem in the first place!