Ability to Repay& Qualified Mortgage

•Effective Date: Submissions dated 1/10/2014 or later

•Requirements: 1) Lender must determine and document the

borrower’s ability to repay the loan, and;

2) Lender must insure all loan term and fee restrictions required under the QM rules have been satisfied.

Ability to Repay

Ability to Repay requirements:1. Requires Lenders to make a reasonable, good-faith

determination that the consumer has a reasonable ability to repay the loan.

2. The ATR requirement is presumed to be met if the loan qualifies under the QM rules.

Qualified Mortgage Loans

There are two categories of QM loans:

•General QM loans•Temporary QM Loans

General QM Loans

A General QM loan is any loan that:i. Does not have a loan term over 30 years,

ii. Does not contain risky features (balloon or IO loans)

iii. Does not contain points and fees in excess of 3%

iv. Has a DTI that does not exceed 43%

Temporary QM Loans

A Temporary QM loan is any loan that:i. Does not have a loan term over 30 years,

ii. Does not contain risky features (balloon or IO loans)

iii. Does not contain points and fees in excess of 3%

iv. Is eligible for purchase or guarantee by Fannie Mae or Freddie Mac or be eligible for insurance by HUD, VA or USDA.

Temporary QM loans are not subject to the 43% DTI requirement. These loans will follow Agency established DTI guidelines.

Points and Fees

• 3% of the total loan amount on loans greater than or equal to $100,000;

• $3,000 for loans greater than or equal to $60,000, but less than $100,000;

• 5% of the total loan amount for a loan greater than or equal to $20,000, but less than $60,000;

• $1,000 for a loan greater than or equal to $12,500, but less than $20,000; and

• 8% of the total loan amount for loans less than $12,500.

What is included in the 3% Cap?

When calculating the 3% cap, the following fees must be included:•All broker compensation, regardless of whether it is paid by the borrower directly or by the lender;•Discount points that do not lower the rate;•Loan Level Price Adjusters, but only when they result in a discount point charge (See Discount Points above).•Any fee for third party charges if any portion of the fee is retained by the lender, the broker or an affiliate of either. •Any fee paid to the Lender (Underwriting Fee, Document Preparation Fee, Funding Fee, etc.)

Exclusions from the 3% Cap

• Bona fide Discount Points, as follows:

1. Exclude up to 2 bona fide discount points if the interest rate before the discount does not exceed the APOR for a comparable transaction by more than 1%, or

2. Exclude up to 1 bona fide discount point if the interest rate before the discount does not exceed the APOR for a comparable transaction by more than 2%.

 Note that a discount point is “bona fide” if it reduces

the consumer’s interest rate by an amount that reflects established industry practices, such as secondary mortgage market norms.

 

Exclusions from the 3% Cap – Cont’d •Real Estate related fees – These fees are excluded if the fee is reasonable, the lender does not receive direct or indirect compensation in relation to the charge, and the charge is not paid to an affiliate:

1. Fees for title examination, escrow/settlement, abstract of title, title insurance, property survey, and similar purposes.

2. Fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents.

3. MIP Insurance premiums for FHA loans and the VA Funding fee.4. Notary and credit-report fees. 5. Property appraisal fees or inspection fees to assess the value or

condition of the property if the service is performed prior to consummation, including fees related to pest-infestation or flood-hazard determinations.

6. Amounts paid into escrow or trustee accounts.7. Fees for extensions, renegotiations, and float downs

Broker CompensationOur current Broker Compensation plans are as follows, there will be 3 options;

● 2% of the loan amount and either a $350 or $500 flat dollar amount in addition to cover processing

● 2.25% of the loan amount and either a $350 or $500 flat dollar amount in addition to cover processing

● 2.50% if the loan amount and NO flat fee

NOTE: for brokers selecting a 2.50% comp. plan, broker owned escrow companies will not be allowed.

In all cases, we would offer a maximum compensation of either $8,000 or $15,000Brokers will also have the option of not selecting a maximum under both options

Thank you