Answer:
This is not an either/or issue. It is not a matter of following one set of parameters over the other. The threshold for a Higher Priced Covered Transaction (HPCT) for a small creditor is 3.5%. The effect of having a QM with an APR that exceeds that threshold is that the loan no longer has a safe harbor for compliance with ability to repay, but rather converts to having a rebuttable presumption of compliance with ability to repay.
As a totally separate matter a loan is an HPML when the APR exceeds the APOR by more than 1.5% (2.5% if it's a "jumbo" loan). There are a variety of factors that come into play when a loan is an HPML outlined in 1026.35 including a requirement to escrow for taxes and insurance (subject to certain exclusions), appraisal requirements, and disclosure of appraisal requirements.
A loan can fall into one of four categories: 1.Is an HPML, but not an HPCT
2.Is an HPCT, but not an HPML
3.Is both an HPCT and an HPML
4.Is neither an HPCT nor an HPML
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