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Small Creditor QM DTI Loan Policy Exception

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  • #4487
    rcooper
    Keymaster

    A question we received from a member:

    If our internal loan policy states we have a DTI guideline of 40% but we approve a mortgage with a DTI of 45%, does that still qualify for a QM using the small creditor exemption since small creditors are exempt from the 43% DTI limit?

    #4488
    rcooper
    Keymaster

    As you stated, there isn’t a DTI ceiling for the small creditor QM option. As long as you consider the DTI and verify the debt and income in accordance with 1026.43(e)(5)(B) then there isn’t a limit on the DTI, which means you could make an exception to your policy. Just remember that exceptions to your loan policy increases fair lending risk. Exceptions should be infrequent and well documented.

    #4492
    elebra
    Participant

    What if our policy stats that at consummation, DTI will not be above 36%. Initial rate has payment below 36% but when we “payment shock” it, it is above 36%. I know there is no limit for the small creditor but would this be an exception?

    #4536
    rcooper
    Keymaster

    You’re going to be calculating the DTI in accordance with the ATR/QM rules that you choose to comply with. If the resulting DTI is over your policy limit then it would be an exception.

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