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#2066100 - 02/25/16 07:11 PM April 1, 2016
4newt Offline
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East Texas
Need to see if I'm thinking right. We are considered a small creditor by every test and will remain so. If I am reading the rule right, as of 4/1/16, we can still make QM's with balloons. It can't be that simple. What am I missing? confused

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Ability to Repay/Qualified Mortgage Rule
#2066102 - 02/25/16 07:13 PM Re: April 1, 2016 4newt
Skittles Offline
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TN
Yes you can (as far as I have learned); however they cannot be Higher Priced Covered Transactions. If you have an HPCT then you must qualify the borrower on the balloon payment.
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#2066105 - 02/25/16 07:16 PM Re: April 1, 2016 4newt
4newt Offline
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East Texas
Thank you, Skittles. I forgot that. I need to be sure my LO's and processors remember that part.

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#2066137 - 02/25/16 08:34 PM Re: April 1, 2016 Skittles
John Burnett Offline
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Quote:
Originally Posted By Skittles
Yes you can (as far as I have learned); however they cannot be Higher Priced Covered Transactions. If you have an HPCT then you must qualify the borrower on the balloon payment.



I'm not so certain that's correct. If you are qualified on all three criteria, your ability to write balloon-payment QMs under 1026.43(f) would not be affected at all, and under (f)(1)(ii) and (iii) you'd be able to ignore the balloon payment in qualifying the borrower. If you don't qualify under the "rural and underserved" criterion but do meet the other two criteria, you'' no longer be able to make balloon-loan QMs at all. But you will be able to make QMs under the general ATR requirements, in which case. Skittles comment is correct.
Last edited by John Burnett; 02/25/16 08:44 PM.
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#2066140 - 02/25/16 08:42 PM Re: April 1, 2016 4newt
4newt Offline
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East Texas
Ok. Thank you, John, for clarifying.

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#2066145 - 02/25/16 09:03 PM Re: April 1, 2016 John Burnett
lucyc Offline
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To verify if we are a small creditor under the asset size and originations limit we are still able to general small creditor qms but since we don't meet the "rural and underserved" criteria we will not longer be able to generate small creditor balloon qms. Is that correct?

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#2066217 - 02/26/16 02:36 PM Re: April 1, 2016 lucyc
Ski Offline
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Posts: 639
South Louisiana
That seems like the case until the CFPB publishes it's interpretation of the FAST Act's removal of the word "predominantly" from two sections of Reg. Z.

Only when this is done will we all know to what degree our institutions have to lend in "rural or underserved" areas.

When this might happen is anyone's guess.

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#2066269 - 02/26/16 04:17 PM Re: April 1, 2016 4newt
lucyc Offline
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OK, Thanks.

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#2066668 - 02/29/16 08:52 PM Re: April 1, 2016 4newt
Christine81 Offline
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Posts: 78
We are a small creditor, however, we do not meet the rural and underserved criteria. When determining HPCT, do we now have to follow the 1.5 over APOR rather than the 3.5 on first lien mortgages with a balloon?

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#2066670 - 02/29/16 09:00 PM Re: April 1, 2016 4newt
John Burnett Offline
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You could still do a QM (non-balloon) loan under 1026.43(e)(5), and such a loan would use the 3.5% margin over APOR definition for HPCT status. Otherwise, you'd have to use the 1.5% margin.
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#2066672 - 02/29/16 09:06 PM Re: April 1, 2016 4newt
Christine81 Offline
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Posts: 78
Thanks John. That confirms what I was finding. I was just hoping I was missing something.

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