ATR, Appendix Q, QRM, QM, and seller financing (904)

Agenda Define ATR Define QM and QRM Appendix Q High cost mortgage and High Priced Loans Homeowner counseling ECOA Appraisal changes Jan 10th Appraisals and HPML Jan 18 th LO Compensation Seller Financing

Mortgage financing reform issues Qualified Mortgage (QM) /Ability to Repay Qualified Residential Mortgage (QRM)/Risk Retention Integrated Mortgage Disclosures under RESPA and TILA State Level Guarantee-Fee (g-fees) Pricing Seller Financing: SAFE Act Loan Originator Compensation (including impact on seller financing) Mortgage Servicing GSE Reform Appraisals for Higher Risk Mortgages Appraisal Reforms Basel III Use of Eminent Domain to Acquire Underwater Mortgages PACE (Property Assessed Clean Energy) Programs Lease Accounting

ATR Consumer has three years after closing to report an ATR Violation Lender failing to comply can be responsible for significant damages Borrower can bring a claim to offset the mortgage while home is in foreclosure

ATR subject to Primary second homes and investment properties occupied more than 14 calendar days in one year ATR does not apply to Business loans HELOCS Construction loans Reverse mortgages bridge loans or investment properties occupied 14 days or less per calendar year Standards set forth by Appendix Q of the Hud underwriting manual

8 factors of ATR Income or assets Current employment Special calculation on IO, ARM negative amortization and balloon notes Simultaneous mortgages Monthly payment on all items Current debt Residual income Credit History

QM and QRM Points Test Non-risky Underwriting standards Adherence to Appendix Q QRM refers to

New categories for loans QM Safe Harbor Not HPL borrow can’t challenge ATR borrow can challenge Safe Harbor Rebuttable Presumption Considered a HPL Borrower can make claim against lender for ATR Non QM Considered an HPL Non Appendix Q High risk loan Exempt Bond loans Reverse mortgages Out right investor loans

HOEPA Home Ownership and Equity Protection Act Requires lenders to give options to consumers up front about homeownership counseling Set a “ High Cost loan standard” – points and fees threshold reduced from 8%-6.5% - Different than the QM Points and Fees test. A loan can pass HOEPA but fail QM Points and fees – would be a non QM loan

HPML ( Higher Priced Mortgage Loans) Conforming - Exceeds national APR by 1.5% Non-conforming – exceeds nation APR by 2.5% Subordinate liens with APR that exceeds 3.5%

Loan Officer Compensation and other changes Lengthens time of record keeping Requires loan origination ID on loan documents Qualification of LO – SAFE act Restricts creditors from Arbitration and federal claims waivers

Summary of changes Appraisals Reg b – CFPB Appendix Q changes Reg x – RESPA Reg z - ATR ECOA – homebuyer counseling Fewer borrowers will qualify for QM loans Lenders will offer fewer options to eliminate exposure

Seller Financing restrictions Five or fewer transactions a year Three or fewer One in a 12 month period Seller financers must comply with LO comp rules and the SAFE act Must register where seller financers have more than three transactions a year

entity_compliance-guide.pdf (904)