ATR Exemption?

This feels like a stupid question but I'm checking in case there's something I'm missing.

Is there some sort of exemption to the ATR requirements for small banks or mortgages that are going to be held exclusively in portfolio?

I personally am not aware of any such thing - I believe that the requirements still apply, the only difference is that we have more latitude over our procedures than we would if we intended to take them secondary market. But I was asked, so I'm hoping to get a second opinion here.

You are correct, unless the loan is exempt from Section 43 due to the loan being a HELOC or a timeshare transaction.

It's not an exemption, but it is a defacto QM Safe Harbor. You won't find it in Regulation Z, however, because it was statutory relief provided in 2018. Look at revisions to the Truth in Lending Act made in Section 101 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (Public Law 115-174). Under those statutory provisions, if your bank meets certain criteria (primarily asset size) and the loan meets certain criteria (including held in portfolio, no interest only, no negative am, no prepayment penalty), and your underwriting "considers and documents debt, income, and financial resources of the consumer", the loan will be considered a Safe Harbor QM loan. The statute also is clear that the consideration and documentation of income does not need to be done under any specific standards including Appendix Q or any successor regulation and stipulates that it can be done in a variety of methods.

This was super helpful. Thanks!

I am not sure that Section 101 ever became effective did it? There is no effective date in the law and the CFPB never promulgated any regulations.

It was self-effectuating, but left enough unanswered questions to make it tricky for implementation. The CFPB really needs to clarify things that are presently silent. Are the unaddressed items supposed to match the General QM treatment, or will aspects of the Small Creditor Qualified Mortgage exemption be adopted? Maybe the CFPB wanted to get the new General QM laid out first? Regardless, I wonder about things like:

- How can balloon payments be made?
- Any loan term limits? (30 years?)
- How should income, assets, debt, etc. be considered and verified?
- HPCT applicability; guidance and thresholds.
- HCML applicability; guidance and thresholds.
- Are affiliates really included in the $10B asset threshold? They are included in the definition of "covered institution", but are purposefully excluded from the HPML escrow exemption criteria of EGRRCPA section 108. These are admittedly two different things, but that inconsistency isn't helpful.