Reg Z QM – What is a Qualified Mortgage?

Compliance > Regulation Z - TILA > Ability to Repay / Qualified Mortgages
Q:  What is a Qualified Mortgage?
 
A:  The rule provides a presumption that creditors that originate Qualified Mortgages (QMs) have complied with the ATR requirements. That means a court will treat a case differently if a consumer files an ATR claim where the loan is a QM. Creditors will be presumed to have complied with the ATR requirements if they issue QMs. The QM standard helps protect consumers from unduly risky mortgages. It also gives you more certainty about potential liability.
 
There are four types of Qualified Mortgages under the rule. Two types, the General and Temporary QM definitions, can be originated by all creditors. Two other types, Small Creditor and Balloon-Payment QMs, can only be originated by small creditors.
 
The QM requirements generally focus on prohibiting certain risky features and practices, such as negative amortization and interest-only periods and loan terms longer than 30 years.  In addition, for all types of QMs, points and fees generally may not exceed 3 percent of the total loan amount, but higher thresholds are provided for loans below $100,000.
 
The type of presumption of compliance for a QM depends on whether it is higher-priced.
 
Qualified Mortgages under the General and Temporary definitions are considered higher-priced if they have an APR that exceeds the APOR by 1.5 percentage points or more for first-lien loans and 3.5 percentage points or more for subordinate-lien loans. Small Creditor and Balloon-Payment QMs are considered higher-priced if they have an APR that exceeds the APOR by 3.5 percentage points or more for both first-lien and subordinate-lien loans/
 
If a loan that is not higher-priced satisfies the QM criteria, a court will conclusively presume that you complied with the ATR rule.
 
If a higher-priced loan meets the QM criteria, a court will presume it complies with the ATR requirements, but the consumer may rebut the presumption.
 
 
 
ADDITIONAL INFORMATION – CFPB ATR/QM Compliance Guide - http://files.consumerfinance.gov/f/201603_cfpb_atr-qm_small-entity-compliance-guide.pdf
 

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