ATR and Guarantors

We have an applicant for a home purchase loan but the DTI is too high for ATR. He is proposing a guarantor who would make a 50% cash downpayment on the house. I don't see a whole lot on the use of guarantors in the reg so I'm guessing such a proposal does not meet ATR requirements?

Will the borrower qualify under ATR after the 50% reduction?

(5) Qualified mortgage defined—small creditor portfolio loans. (i) Notwithstanding paragraph (e)(2) of this section, a qualified mortgage is a covered transaction:

(B) For which the creditor considers at or before consummation the consumer's monthly debt-to-income ratio or residual income and verifies the debt obligations and income used to determine that ratio in accordance with paragraph (c)(7) of this section, except that the calculation of the payment on the covered transaction for purposes of determining the consumer's total monthly debt obligations in paragraph (c)(7)(i)(A) shall be determined in accordance with paragraph (e)(2)(iv) of this section instead of paragraph (c)(5) of this section;


Official Interpretation

2(a)(11) Consumer

1. Scope. Guarantors, endorsers, and sureties are not generally consumers for purposes of the regulation, but they may be entitled to rescind under certain circumstances and they may have certain rights if they are obligated on credit card plans.

Thanks Norman and I saw that in a previous thread. However, it leads me back to Cracked Eggs comment (question). Does the fact that the gtr makes a down-payment to get DTI within the ability to repay go against the ATR rules?

If the borrower was going to borrow X (with a too high DTI) and is now going to borrower 1/2 X and his DTI is now acceptable, i don't see a problem. But to me, this scenario then makes the loan not need a guarantor....why would you require a guarantor on a loan that now has an acceptable DTI? The gift down payment from one to another is between those two now....IMHO.

Splitting hairs here but the ATR determination should be made at the time the loan is originated, not after. When will this payment be made? Post-closing?

Agree.

Norm...it's a downpayment...that should happen at consummation.