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Bi Weekly Mortgages

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  • #14682

    jsevers
    Participant

    Hi We are looking to introduce an in house Bi weekly mortgage product. Are there any ATR/QM implications with this type of product. We do fall under the Small Creditor option as well. Any guidance I can look at?
    thank you
    Jenny

    #14687

    rcooper
    Keymaster

    I am not aware of any specific guidance related to bi-weekly mortgage payments. You would need to look to the requirements in 1026.43.

    1026.43(c)(5) Payment calculation. (i) General rule. Except as provided in paragraph (c)(5)(ii) of this section, a creditor must make the consideration required under paragraph (c)(2)(iii) of this section using:

    (A) The fully indexed rate or any introductory interest rate, whichever is greater; and

    (B) Monthly, fully amortizing payments that are substantially equal.

    Comment 1026.43(c)(5)(i)-3. Monthly, fully amortizing payments. Section 1026.43(c)(5)(i) does not prescribe the terms or loan features that a creditor may choose to offer or extend to a consumer, but establishes the calculation method a creditor must use to determine the consumer’s repayment ability for a covered transaction. For example, the terms of the loan agreement may require that the consumer repay the loan in quarterly or bi-weekly scheduled payments, but for purposes of the repayment ability determination, the creditor must convert these scheduled payments to monthly payments in accordance with § 1026.43(c)(5)(i)(B). Similarly, the loan agreement may not require the consumer to make fully amortizing payments, but for purposes of the repayment ability determination under § 1026.43(c)(5)(i), the creditor must convert any non-amortizing payments to fully amortizing payments.

    Small Creditor QM:
    1026.43(e((5)B) For which the creditor considers at or before consummation the consumer’s monthly debt-to-income ratio or residual income and verifies the debt obligations and income used to determine that ratio in accordance with paragraph (c)(7) of this section, except that the calculation of the payment on the covered transaction for purposes of determining the consumer’s total monthly debt obligations in paragraph (c)(7)(i)(A) shall be determined in accordance with paragraph (e)(2)(iv) of this section instead of paragraph (c)(5) of this section;

    1026.43(e)(2)(iv) For which the creditor underwrites the loan, taking into account the monthly payment for mortgage-related obligations, using:

    (A) The maximum interest rate that may apply during the first five years after the date on which the first regular periodic payment will be due; and

    (B) Periodic payments of principal and interest that will repay either:

    (1) The outstanding principal balance over the remaining term of the loan as of the date the interest rate adjusts to the maximum interest rate set forth in paragraph (e)(2)(iv)(A) of this section, assuming the consumer will have made all required payments as due prior to that date; or

    (2) The loan amount over the loan term;

    and

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