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#1895129 - 02/07/14 08:26 PM Re: QM vs Non-QM Loans JoAnne
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Ability to Repay/Qualified Mortgage Rule
#1895133 - 02/07/14 08:29 PM Re: QM vs Non-QM Loans JoAnne
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Right. I just think the QM/non-QM thing is kinda circular.....it's a QM IF you followed ATR...and if you followed ATR, it really doesn't matter if it's a "QM" or not..at least it shouldn't.
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#1895136 - 02/07/14 08:32 PM Re: QM vs Non-QM Loans JoAnne
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Isn't following ATR mandatory to be in compliance with Reg Z?

Doesn't the only difference between QM and Non-QM boil down to DTI (43% for QM, no limit for Non-QM)?

(I am so confused!!)
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#1895138 - 02/07/14 08:33 PM Re: QM vs Non-QM Loans JoAnne
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JoAnne....i should have pointed out, i'm coming at this from the angle of a rural/underserved and small creditor, so the 43% DTI figure is not a player for me.

Yes, following ATR is mandatory, which is what i've been basing my posts on. Sorry...didn't mean to derail your thread and lead to any confusion.
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#1895150 - 02/07/14 09:02 PM Re: QM vs Non-QM Loans JoAnne
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Originally Posted By: JoAnne
Isn't following ATR mandatory to be in compliance with Reg Z?

Doesn't the only difference between QM and Non-QM boil down to DTI (43% for QM, no limit for Non-QM)?

(I am so confused!!)


You have to follow ATR. Period. That's what you must do.

Originating a QM is one way to follow ATR. If you don't like the QM underwriting requirements ( limits on points and fee, DTI thresholds, appendix Q, etc ) you can come up with your own criteria as long as it considers the 8 factors listed in .43.
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#1895277 - 02/10/14 01:46 PM Re: QM vs Non-QM Loans JoAnne
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As I am reading all the comments, and looking back at training I took in 2013, and reading notes, etc., I think I am finally getting it. Non-QM (or General ATR as I have seen it referred to), is basically underwriting as it has been with the added "documentation" and "verification" of ATR. Lenders can continue to do ballon or interest-only loans as long as they consider and verify 8 ATR Underwriting factors. There are no points and fees limits, no DTI or Residual Income limits, other than to consider and verify.

The implications of the Non-QM (or General ATR) loan vs the QM loan is that their is no safe harbor or rebuttable presumption of compliance with the ATR rules for the Non-QM/General ATR loans. For Non-QM/General ATR the burden of proof is on the lender.

Are these all true statements?
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#1895293 - 02/10/14 02:37 PM Re: QM vs Non-QM Loans JoAnne
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Originally Posted By: JoAnne
As I am reading all the comments, and looking back at training I took in 2013, and reading notes, etc., I think I am finally getting it. Non-QM (or General ATR as I have seen it referred to), is basically underwriting as it has been with the added "documentation" and "verification" of ATR. Lenders can continue to do ballon or interest-only loans as long as they consider and verify 8 ATR Underwriting factors. There are no points and fees limits, no DTI or Residual Income limits, other than to consider and verify.

The implications of the Non-QM (or General ATR) loan vs the QM loan is that their is no safe harbor or rebuttable presumption of compliance with the ATR rules for the Non-QM/General ATR loans. For Non-QM/General ATR the burden of proof is on the lender.

Are these all true statements?


Assuming your bank was considering the 8 factors of ATR all along, I'd say you've got it.

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#1895329 - 02/10/14 03:46 PM Re: QM vs Non-QM Loans JoAnne
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JoAnne,
I may get shot for this. JMHO, if you follow ATR, you do have a "rebuttable presumption of compliance". There may be no "safe harbor" that you get with QM to shield yourself. You may have to prove the ATR documentation in court to win the point, but this is rebuttable presumption as long as you follow the 8 factors.

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#1895332 - 02/10/14 03:50 PM Re: QM vs Non-QM Loans JoAnne
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I think that is a fair statement, hgliii.
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#1895337 - 02/10/14 03:55 PM Re: QM vs Non-QM Loans JoAnne
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Thanks, I am in process of updating the ATR from CFPB in January and that is what I am taking from the guide. We had set everything in procedures in December. Now just trying to fine tune.
I'm sure when I get it completed, they will change it again.
I feel like my dog chasing its tail. Everytime I get close the tail changes directions.

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#1895350 - 02/10/14 04:12 PM Re: QM vs Non-QM Loans hgliii
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laugh
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#1912820 - 04/08/14 08:29 PM Re: QM vs Non-QM Loans JoAnne
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"so in the end, what is the difference between a QM loan and Non-QM loan? (that is what my lender wants to know)"


Hi JoAnne-


If a loan is "Non-QM," the creditor must (for minimum compliance) consider the potential borrower's ability to repay using the 8 factors to be taken into consideration. In order for a creditor to receive "presumption of compliance," they are required to meet 6 requirements (Under the General QM)-

To be considered a General QM:
1. Have substantially equal periodic payment that do not result in principal deferral, a balloon payment or negative amortization;

2. Have a loan term of 30 years or less;

3. Be underwritten using a monthly payment calculated in accordance with the specific section of the Rule (potentially a different calculation than ATR)monthly related obligations and the monthly payment on a simultaneous loan calculated under the Rule;

4. Have points and fees that do not exceed the applicable points and fees tier under the Rule;

5. Have a DTI of 43% or less, calculated in accordance with Appendix Q; (not applicable to GSE's "Special Rules QM")

6. Have applicant income, assets, debt, obligations, etc. that are verified in accordance with Appendix Q and the General Ability to Repay Test.

If the loan meets all of the 6 aforementioned requirements, and is not an HPML, than the loan creates a "conclusive" presumption of compliance, or Safe Harbor. Whereas, if the loan meets the 6 requirements and is an HPML, than it has a "rebuttable presumption in which the borrower has a legal right to challenge the presumption of compliance. As the entire conversation above states by the experts, how litigation proceedures will start will be an entire different issue. My employer only writes to Special Rules (or Temporary QM) and General QM so I am not familiar on the other 2 QM's allotted by small creditors. I hope this helped. :-)

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#1912824 - 04/08/14 08:33 PM Re: QM vs Non-QM Loans JoAnne
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In a nutshell, General ATR has 8 (not 6) requirements and carries no presumption of compliance.

HPML has rebuttable and QM has conclusive compliance.
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