Our bank is looking into offering mortgages with an initial fixed rate, short term loan (5-7yrs) with a balloon payment, then financing the balloon
balance into a longer term (20yr) ARM. Can we do this without determining Ability to Repay for the initial short term portion? Also, would this be
dependent on if the bank is considered a small creditor and serves only rural or underserved areas?
Credit Bureaus are now allowing consumers to "self-report" utility accounts on their credit histories. These accounts show as payments and performance
does affect their credit scores. For ATR compliance, should these reported accounts now be considered in DTI calculations or can they be excluded? As
a side note, I am seeing automated software pulling these utility accounts into the calculations as any other credit account.
We currently have a consumer in the permanent financing phase of a construction/permanent loan. There was no guarantee we would provide the permanent financing at our bank.
When construction was approved the borrower was considered self-employed. He owned two businesses and within the last year has sold a large portion of his businesses and now receives a salary as a manager, rather than an owner.
Do we need to complete a full cash flow on this borrower, or could we use the current income received from his salary for ability to repay rules?
How must we consider student loan debt that is based on the borrower's income and therefore deferred when it comes to the borrower's Ability to Repay?
I was asked the following questions by a member of my bank's Senior Management Team. "In the event a consumer loan applicant does not own a residence, and he/she claims to not be responsible for any rent. Can a minimum housing provision (say $400) be used when calculating DTI for this customer? I have done lots of research, but so far I have not been able to
find an answer one way or the other.
I personally feel that it could be considered a violation, but I need to be able to reference what that violation would be?
For Conventional loans, can you omit Medical Debt for consideration for Underwriting ?
I have an appendix Q/ATR question. If a borrower is retired and has pension income from their previous employer and receives Social Security income, but has significant assets in IRA’s that he is not taking distributions from, would it be reasonable to assume an amortization of those funds? For example, an IRA in the amount of $800,000, if he averages earning 3% per year, he
could draw $3,373 per month for 30 years. Would this be okay under QM guidelines? With only the pension & Social
Security income, the DTI is greater than 43%, but assuming an amortization of the IRA funds would put the DTI below 43%.
On Home Equity Term Loans, are we required to Verify Employment as part of the Ability to Repay?