[jemery]

I have been reviewing the ATR/QM rules and I have a couple of questions.
1. I know with a QM we must evaluate the 8 factors and verify all of the information as described in Appendix Q. However, if the loan is a non-QM, must the same 8 factors be reviewed and verified as described in Appendix Q?
2. Is there anything that exempts mortgages with 25+ acres from these requirements?
3. For a small creditor, what is the definition of originated loans? Is that actual loans that have closed, excluding the denied applications?
Thanks for your help!

Topic

[rcooper]

1. If it is a loan covered by section 1026.43 then you must make a reasonable and good faith determination at or before consummation that the consumer has the ability to repay the loan according to its terms. You may choose to comply with the general ATR requirement or, in order to gain the safe harbor/rebuttable presumption of compliance, one of the QM requirements. Either way you will need to comply with this section if you have a covered loan.
2. No, there is no exemption for more than 25+ acres that I am aware of, but there is an exemption for vacant land. See a coverage summary from the CFPB’s Small Entity Compliance Guide below:
The Bureau’s ATR/QM rule applies to almost all closed-end consumer credit transactions secured by a dwelling including any real property attached to the dwelling. This means loans made to consumers and secured by residential structures that contain one to four units, including condominiums and co-ops. Unlike some other mortgage rules, the ATR/QM rule is not limited to first liens or to loans on primary residences. However, some specific categories of loans are excluded from the rule. Specifically, the rule does not apply to:
•Open-end credit plans (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)
•A construction phase of 12 months or less (with possible renewal) of a construction-to-permanent loan
•Consumer credit transactions secured by vacant land
3. Originated loans would not include denied applications.

[jemery]

Just to clarify on number one… So if I have a covered transaction we must either comply with the general ATR rules which are the 8 factors and covered in Appendix Q or we can comply with the QM rules and have a safe harbor/rebuttable presumption of compliance? So basically if we comply with the general ATR rules only we will have a non-QM loan?

[jemery]

I have been reading part of the regulation again trying to figure out if a loan is a non-QM and meets the ATR standards does it also need to comply with Appendix Q? From my interpretation of the regulation, my thoughts that only a QM loan needs to comply with Appendix Q. Is this correct?

[rcooper]

You are correct.

[jemery]

I know there is no exemption for 25+ acres. However, for many agriculture loans the loan includes the primary residence, but the loan is considered to be for business purposes. So in this case, it would still be exempt from ATR/QM and Reg Z because it is a business purpose loan, correct?

[rcooper]

Business purpose loans are not covered by Reg Z.

[Author]

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