Which loans are exempt from ATR rules?

Which loans are exempt from ATR rules?

CFPB adopted a rule to implement the Dodd-Frank Act ATR/QM provisions….The rule does not apply to:

• Open-end credit plans (such as home equity lines of credit, or HELOCs);
• Time-share plans;
• Reverse mortgages;
• Temporary or bridge loans with terms of 12 months or less (with possible renewal);

What is the ATR rule in mortgage?

In particular, the ATR/QM rule, which effectively makes it harder for lenders to offer loans that are not in the best interest of the applicant. It requires institutions, individuals, or groups to make a “reasonable and good faith determination” regarding a consumer’s ability to repay a loan according to its terms.

What loans does the ability to repay rule apply to?

In part, the rules set out an “ability to repay” (ATR) requirement for virtually all closed-end residential mortgage loans. (A “closed-end loan” is a loan that must be repaid in full by a specified date.)

What are the 8 ATR factors?

At a minimum, creditors generally must consider eight underwriting factors: (1) current or reasonably expected income or assets; (2) current employment status; (3) the monthly payment on the covered transaction; (4) the monthly payment on any simultaneous loan; (5) the monthly payment for mortgage-related obligations; …

Which of the following would be subject to the ATR rule?

Which of the following would be subject to the ATR Rule? The answer is a purchase money mortgage. A purchase money mortgage would be subject to the ATR Rule. High-cost mortgages are permitted to have a variable interest rate, however, negative amortization, advanced payments, and prepayment penalties are not allowed.

What is ATR ability to repay?

The Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule) requires a creditor to make a reasonable, good faith determination of a consumer’s ability to repay a residential mortgage loan according to its terms.

In which federal law would you find the definition of a nontraditional loan?

Which act provides a specific definition of a nontraditional loan? Secure and Fair Enforcement Mortgage Licensing Act. – The SAFE Act provides a definition of nontraditional mortgage products and requires prelicensing and continuing education on this topic.

What is Section 35 HPML?

Regulation Z Section 35 defines an HPML as a loan secured by a primary residence where the APR exceeds Freddie Mac’s “average prime offer rate.

When is a covered mortgage a violation of the ATR?

Your compliance with the ATR requirements is based on the information available during origination of a covered mortgage loan.17 It is not a violation of the ATR requirements if a member cannot repay a covered mortgage loan solely because of a sudden and unexpected job loss after you originated the loan.

What do you need to know about the ATR rule?

While the ATR rule provides eight specific factors you must consider (including verifications of income or assets relied on, employment if relied on, and review of credit history), the rule does not dictate that you follow particular underwriting models.

What was the ATR / QM rule prior to Regulation Z?

Prior to the ATR/QM rule, Regulation Z, which implements the Truth in Lending Act (TILA), prohibited a creditor from making a higher-priced mortgage loan without regard to the member’s ability to repay the loan.

How long do you have to keep records for ATR / QM?

(§ 1026.25(c)(3)) The rule requires that you retain evidence that you complied with the ATR/QM rule, including the prepayment penalty limitations, for three years after consummation, though you may want to keep records longer for business purposes.