We are a small creditor that has committed to only originating QM loans. With that, we have HELOCs maturing that borrowers are no longer eligible for, and don't qualify for QM because of DTI limits or unable to document income. It seems our only option is to freeze HELOC and force them to pay off or foreclose, or to term out as a closed-end loan but change our 'ONLY QM' decision. Does anyone have something I'm missing? Thanks in advance!

Do you have any experience with modifying or renewing your loans? A modification isn't a refinance, so it doesn't make the ATR/QM 'kick in.'

Just make sure you modify before the HELOC matures. You can freeze and modify, following the rules for freezes.

It seems our only option is to freeze HELOC and force them to pay off or foreclose, or to term out as a closed-end loan but change our 'ONLY QM' decision. Does anyone have something I'm missing? Thanks in advance!

If you freeze or terminate the LOC you have to follow the notification requirements in 1026.40. You will also have to continue to process the loan as an open-end loan which means you must continue periodic statements, etc.

You cannot modify it to a closed-end loan without treating it as a refinancing. Anytime you convert an open-end loan to a closed-end loan you must provide all the applicable closed-end disclosures.