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ATR vs HPML

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  • #4074
    shelia
    Participant

    If we qualify a HPML loan using the Ability to Repay rules which payment do we use to compute DTI? The HPML requires the highest principal and interest payment scheduled in the first 7 years but the ATR rules tell us to use the payment that would result from the fully indexed rate or introductory rate, whichever is higher.

    #4076
    Mary Frances
    Participant

    Our understanding is:
    1. For a Non-QM HPCT (HPML) loan use the fully indexed rate
    2. For a QM HPCT (HPML) loan use the maximum rate that could apply during the first 5 years after the date of the first payment (so on the 61st month)
    3. For a QM Balloon HPCT (HPML) loan have to use the balloon payment which does not factor in the rate

    #4082
    rcooper
    Keymaster

    The HPML repayment ability requirements are set to expire at 11:59pm on January 9, 2014 which means they won’t conflict with the ATR requirements when they become effective on January 10, 2014.

    Take a look at the CFPB’s Small Entity Compliance Guide beginning on p. 21 for the general ATR DTI requirements: https://files.consumerfinance.gov/f/201310_cfpb_atr-qm-small-entity_compliance-guide.pdf

    I agree with that the general and small creditor QM requires the maximum rate during the first 5 year.

    from p. 35 of the SECG: regarding balloon QM…You must determine that the consumer will be able to make the scheduled periodic payments (including mortgage-related obligations) other than the balloon payment. Unlike the calculation of balloon loan monthly payments for determining ATR (See “Calculating payments under the ATR standard for the loan you are underwriting: § 1026.43(c)(5)” on page 21), the Balloon-Payment QM calculation excludes the balloon payment even if the loan is a higher-priced loan,

    You can find this in 1026.43(e)(6) and(f).

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