Small Creditor HPML Threshold

Posted By: Comply Central

Small Creditor HPML Threshold - 02/18/21 08:52 PM

As a small creditor our threshold is 3.5 over the APOR on any lien, correct?
Posted By: rlcarey

Re: Small Creditor HPML Threshold - 02/18/21 09:32 PM

Not that I am aware of.

1026.35(a) Definitions. For purposes of this section:

(1) "Higher-priced mortgage loan" means a closed-end consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set:

(i) By 1.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that does not exceed the limit in effect as of the date the transaction's interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac;

(ii) By 2.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that exceeds the limit in effect as of the date the transaction's interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac; or

(iii) By 3.5 or more percentage points for loans secured by a subordinate lien.
Posted By: Comply Central

Re: Small Creditor HPML Threshold - 02/18/21 09:49 PM

I was interpreting this to say that as long as we make one of the covered qualified mortgages the threshold would be higher.

4) Higher-priced covered transaction means a covered transaction with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by 1.5 or more percentage points for a first-lien covered transaction, other than a qualified mortgage under paragraph (e)(5), (e)(6), or (f) of this section; by 3.5 or more percentage points for a first-lien covered transaction that is a qualified mortgage under paragraph (e)(5), (e)(6), or (f) of this section; or by 3.5 or more percentage points for a subordinate-lien covered transaction.

The Unofficial Redline of the General QM and Seasoned QM Final Rules on the CFPB site says this:
(4) Higher-priced covered transaction means a covered transaction with an annual
percentage rate that exceeds the average prime offer rate for a comparable transaction as of the
date the interest rate is set by 1.5 or more percentage points for a first-lien covered transaction,
other than a qualified mortgage under paragraph (e)(5), (e)(6), or (f) of this section; by 3.5 or
more percentage points for a first-lien covered transaction that is a qualified mortgage under
paragraph (e)(5), (e)(6), or (f) of this section; or by 3.5 or more percentage points for a
subordinate-lien covered transaction. For purposes of a qualified mortgage under paragraph
(e)(2) of this section, for a loan for which the interest rate may or will change within the first five
years after the date on which the first regular periodic payment will be due, the creditor must
determine the annual percentage rate for purposes of this paragraph (b)(4) by treating the
maximum interest rate that may apply during that five-year period as the interest rate for the
full term of the loan.

Am I misinterpreting this?
Posted By: rlcarey

Re: Small Creditor HPML Threshold - 02/18/21 10:23 PM

That is part of Section 43 and defines a higher-priced covered transaction (HPCT), which has to do with a QM with a rebuttable presumption and really has nothing to do with Section 35 which addresses HPMLs.
Posted By: Comply Central

Re: Small Creditor HPML Threshold - 02/18/21 11:06 PM

So if we price our loans as a HPML and we are a small creditor that does not escrow and the loan is also a small creditor QM, there is nothing extra that is required, correct? The HPML Appraisal rules list a QM as an exemption to the rule and we meet the exemption requirements for the escrow rules. Thank you for your help. I just want to make sure I understand this correctly.
Posted By: rlcarey

Re: Small Creditor HPML Threshold - 02/18/21 11:10 PM

Sounds like it to me.
Posted By: Comply Central

Re: Small Creditor HPML Threshold - 02/18/21 11:12 PM

Thank you!