Thread Options
#1894667 - 02/07/14 03:27 AM ATR and ARM loans
Tryin-2-Comply Offline
100 Club
Joined: Apr 2003
Posts: 202
Hills of TN
Under ATR, I want to make sure we are calculating DTI and repayment ability correctly.

Our ARM is pretty simple.

Intro rate: Fixed for 3 years. Adjusts every 3 years. Index of .73 plus a margin of 4.25%

Maximum adjustment cap 2.5%

Future margin 4.25

Our software provider is showing that the maximum rate during the first 5 years is 7.98.

The introductory rate is 4.98%; whereas 2.5% could be added at month 37, resulting in a maximum during first 5 years of 7.98% - I am of the opinion that we would use the 7.98% and the cooresponding payment amount to underwrite ATR? Am I correct?

Return to Top
Ability to Repay/Qualified Mortgage Rule
#1894683 - 02/07/14 01:33 PM Re: ATR and ARM loans Tryin-2-Comply
Sinatra Fan Offline
Power Poster
Sinatra Fan
Joined: Jul 2002
Posts: 5,568
New Jersey
Yes, you would use the maximum rate in the first five years.

But 4.98% + 2.50% is 7.48%, not 7.98%. Did I miss something?
_________________________
Management is doing things right; leadership is doing the right things. Peter Drucker

Return to Top
#1894739 - 02/07/14 02:39 PM Re: ATR and ARM loans Tryin-2-Comply
Tryin-2-Comply Offline
100 Club
Joined: Apr 2003
Posts: 202
Hills of TN
Thanks, you're correct, it was a very long day - just a typo.

Thanks again.

Return to Top
#1894773 - 02/07/14 03:08 PM Re: ATR and ARM loans Tryin-2-Comply
dblack Offline
Gold Star
Joined: Feb 2008
Posts: 263
AL
Just to clarify-

You are talking about originating a QM, right?

If you are talking general ATR, it would be the fully-indexed rate of 4.98% in your example.
_________________________


CRCM



Return to Top