Wholesale and Correspondent Lending Divisions
Dodd-Frank Ability to Repay and Qualified Mortgage Rule
This Bulletin describes PRMG’s Wholesale and Correspondent Lending policy for compliance with the CFPB’s Truth in Lending regulations implementing the Ability to Repay (ATR) provisions of the Dodd-Frank Act. The information contained in this communication pertains only to PRMG’s requirements for complying with the ATR Rule and is not intended as legal advice.
Loan applications originated on or after January 10, 2014, must meet the CFPB’s definition of a Qualified Mortgage (QM) to be eligible for submission to PRMG. Eligible Qualified Mortgages include General QMs, Temporary QMs and FHA QMs under the Safe Harbor or Rebuttable Presumption of Compliance standards. Applications originated prior to January 10 but submitted to PRMG on or after that date are not subject to the ATR Rule.
QM Points and Fees
Points and fees must meet the restrictions set by the CFPB on all QMs. There is no tolerance for excessive fees, and violations are not curable. Applications originated on or after January 10 with fees exceeding the QM caps will be rejected for submission. The QM maximum points and fees are based on the loan amount:
- 3% on loans of $100,000 and up
- $3,000 on loans of $60,000 - $100,000
- 5% of the loan amount on loans of $20,000 - $60,000
- $1,000 on loans of $12,500 - $20,000
- 8% of the loan amount on loans under $12,500
Your loan submission must clearly identify all fees and charges on the loan on your Fee Worksheet or other detailed format generated by your loan origination system, including settlement service fees paid to your affiliate, as defined under the Bank Holding Company Act at 12 USC 1841. Loans will be rejected for failure to completely identify all fees and any amounts paid to an affiliated settlement service provider. A description of fees to be included in QM points and fees and any permissible exclusions are detailed in a QM Points and Fees Summary, available in PRMG’S Resource Center. If your loan origination system produces a QM Points and Fees Test on your applications, please include a copy of the QM test results with your submission.
Exclusion of certain bona fide discount points from the QM points and fees is explained in the QM Points and Fees Summary.
Credits to Reduce Points and Fees
Interest-rate credit may be applied to reduce points and fees other than broker compensation or fees paid to an affiliate of the broker. Seller credits may be applied to reduce only those points and fees that are finance charges, including discount points, but not broker compensation or fees paid to the broker’s affiliate.
Lender- or seller-credits may be used to reduce points and fees, including origination charges and discount points paid to a correspondent lender, or fees paid to an affiliate of the lender.
Application of the credit to the fee that is being reduced must be clearly documented. Lender credits to cure RESPA tolerance violations may not also be used to reduce the points and fees.
Origination Charges Paid to Correspondent Lenders
All origination charges in Line 801 and any settlement service fees paid to an affiliate are included in the QM points and fees. Lender- or seller credits may be used to reduce points and fees paid to you or your affiliate. Commissions you pay to your individual loan originators are not included in the points and fees.
Wholesale Lender-paid Compensation Plans
All compensation paid to you by PRMG, origination charges paid to you by your borrower directly, and any settlement service fees paid to an affiliate must be included in QM points and fees. Lender- or seller-credits may not be used to reduce points and fees paid to you or your affiliate. Commissions you pay to your individual loan originators are not included in the points and fees.
In order to meet the QM 3% points-and-fees cap, you may need to adjust your PRMG Lender-paid Compensation Plan. Contact your PRMG Account Executive or our Broker Services Division to re-select your Comp Plan by January 6, 2014. If your Comp Plan is currently set higher than 3.0% or otherwise does not work with the CFPB’s QM points and fees caps and fees paid to your affiliated settlement service provider, and you do not adjust your Plan by January 6, PRMG will re-set your Plan to meet QM standards. With your Comp Plan election, you will be required to identify any affiliated settlement service providers.
In no event will PRMG pay Lender-paid compensation that causes the QM points and fees to exceed the CFPB’s maximum.
Comp Plans may be adjusted quarterly. Beginning next month, PRMG will offer a No Fee Rate Option.