What's the big deal about Appendix Q? It's been an almost constant topic of conversation since the Bureau published the 2013 Ability-to-Repay rule, in spite of the fact that it's really no more than a tool to be used in determining monthly debt-to-income ratios for mortgage loan applicants. The challenge, of course, is that creditors need to understand the tool and use it correctly, or the end product may not be suitable. You can't calculate DTI correctly (and stay under the 43% cap, where required) if you don't know what Q says about the components that go into the math. And when the product to be created is a Qualified Mortgage (QM) under the Ability-to-Repay rules, the consequences of a faulty product can be costly.
In this presentation, you'll receive information that you can use to ensure that your institution understands the Appendix Q underwriting tool and its place in your residential mortgage lending toolbox. During the webinar we'll cover the following topics, and more:
- A quick look at when the use of Appendix Q is actually required
- A rundown of situations in which Appendix Q isn't essential, but may be useful
- The purpose of the Appendix
- Related resources form HUD, VA and others
- Factors to use when considering employment income
- Evaluating salary, wages and other forms of income
- Special considerations relating to employment in a family business
- Considering self-employment income
- Using individual tax returns for verification
- Evaluating corporate, "S Corp" and partnership tax returns
- Evaluating non-employment related income
- Alimony, child support and separate maintenance
- Investment and dividend income
- Looking at military, government agency or assistance program income
- Income from rental property
- "Grossing up" untaxed income
- Treatment of recurring obligations
- Considering contingent liabilities
- Key considerations for projected obligations
- Obligations you don't need to count
Understanding which income and obligations need to be included and how they must be factored into the monthly debt-to-income ratio when making loans for which the use of Appendix Q is required is essential. Omitting significant obligations or overcounting income items can lead to assigning a ratio that appears to meet the criteria for such loans, a decision that can prove costly months or years in the future if a borrower has problems meeting monthly payments, and can invite examiner criticism or regulatory enforcement action.
We'll lead you through it step by step.