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#2256653 - 07/13/21 09:37 PM Construction/Permanent Single Closing - General QM
Anonymous
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Hello, I'm wondering how construction to permanent loans with a single closing should be treated under the GSE's new General QM price-based threshold test.

For ARM loans, we must use the highest interest rate that'll be in effect during the first five years. However, it seems that this will basically always automatically disqualify ARM loans from General QM classification since the APR will exceed the APOR by more than 2.25%.

Are construction loans somehow exempt from the new General QM price-based threshold test? Thanks.

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#2256655 - 07/14/21 11:16 AM Re: Construction/Permanent Single Closing - General QM Anonymous
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 76,933
Galveston, TX
The construction phase on a one-time close is treated as temporary financing and is basically ignored from a QM/ATR standpoint.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2256658 - 07/14/21 01:32 PM Re: Construction/Permanent Single Closing - General QM Anonymous
Anonymous
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Thank you, rlcarey. Should we conduct the price-based threshold test once the loan converts to permanent financing then?

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#2256662 - 07/14/21 02:05 PM Re: Construction/Permanent Single Closing - General QM Anonymous
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 76,933
Galveston, TX
If you are doing a combined disclosure, it would be the APR on the final CD or you would have to calculate the APR separately if the permanent is an ARM loan that adjusts within the first five years.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2256711 - 07/14/21 08:34 PM Re: Construction/Permanent Single Closing - General QM Anonymous
Anonymous
Unregistered

I'm sorry, but I am still confused. If we have a one time close that stays as an ARM loan once the loan enters the permanent phase and the interest rate adjusts within five years, we need to do a special APR calculation using the maximum interest rate that applies during the first five years?

This would probably eliminate most of our ARM loans from General QM classification since the interest rate could increase 3-6% by year 5, particularly on 1/1 ARMs.

Thanks for the clarification.

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#2256721 - 07/14/21 10:19 PM Re: Construction/Permanent Single Closing - General QM Anonymous
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 76,933
Galveston, TX
If you are using the revised General QM - yes. But on portfolio loans, why would you want to?
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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