Ability to Repay and Qualified Mortgage Requirements

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Non-Qualified Mortgage

Civil Liability Risk: No Safe Harbor

Non-Qualified Mortgage Requirements:

Loan Points & Fees do not exceed Regulatory Threshold N
Equal Monthly Payments N
30 Year Maximum Loan Amortization N
5 Year Minimum Loan Amortization N

Non-Qualified Mortgage Prohibitions:

Balloon Payment Prohibition See Note #1
Interest Rate Increase Prohibition N
Negative Amortization Prohibition N
Deferred Principal Payment Prohibition N
Post Consummation Transfer Requirement N

Non-Qualified Mortgage Minimum Underwriting Criteria:

Appendix Q Standards N
Current or reasonably expected income or assets (other than the value of the property that secures the loan) that the consumer will rely on to repay the loan Y
Current employment status (if you rely on employment income when assessing the consumer’s ability to repay) Y
Monthly mortgage payment for this loan. You calculate this using the introductory or fully-indexed rate, whichever is higher, and monthly, fully-amortizing payments that are substantially equal Y
Monthly payment on any simultaneous loans secured by the same property Y
Monthly payments for property taxes and insurance that you require the consumer to buy, and certain other costs related to the property such as homeowners association fees or ground rent Y
Debts, Alimony, and child-support obligations Y
Monthly debt-to-income ratio or residual income, that you calculated using the total of all of the mortgage and non-mortgage obligations listed above, as a ratio of gross monthly income Y
Credit history Y

Non-Qualified Mortgage Underwriting Verification: 3rd Party Documentation

Notes:
#1 - Any balloon payment associated with a non-qualified mortgage due within 60 months of the first scheduled payment date must be included in determining the ability to repay.  For any non-qualified mortgage that is also an HPML, any balloon payment must be included in determining the ability to repay.


Qualified Mortgage

Civil Liability Risk: Conclusive Safe Harbor for Non-HPML Loans; Rebuttable Presumption of Compliance Safe Harbor for HPML loans.

Qualified Mortgage Requirements:

Loan Points & Fees do not exceed Regulatory Threshold Y - See Note #1
Equal Monthly Payments Y
30 Year Maximum Loan Amortization Y
5 Year Minimum Loan Amortization N

Qualified Mortgage Prohibitions:

Balloon Payment Prohibition Y
Interest Rate Increase Prohibition N
Negative Amortization Prohibition Y
Deferred Principal Payment Prohibition Y
Post Consummation Transfer Requirement N

Qualified Mortgage Minimum Underwriting Criteria:

Appendix Q Standards Y
Current or reasonably expected income or assets (other than the value of the property that secures the loan) that the consumer will rely on to repay the loan Y
Current employment status (if you rely on employment income when assessing the consumer’s ability to repay) N
Monthly mortgage payment for this loan. You calculate this using the introductory or fully-indexed rate, whichever is higher, and monthly, fully-amortizing payments that are substantially equal Y
Monthly payment on any simultaneous loans secured by the same property Y
Monthly payments for property taxes and insurance that you require the consumer to buy, and certain other costs related to the property such as homeowners association fees or ground rent Y
Debts, Alimony, and child-support obligations Y
Monthly debt-to-income ratio or residual income, that you calculated using the total of all of the mortgage and non-mortgage obligations listed above, as a ratio of gross monthly income Y - See Note #2
Credit history N

Qualified Mortgage Underwriting Verification: 3rd Party Documentation

Notes:
#1The following points & Fees Thresholds apply: Loans ≥ $100,000 = 3%; Loans ≥ $60,000 but < $100,000 = $3,000; Loans ≥ $20,000 but < $60,000 = 5%; Loans ≥ $12,000 but < $20,000 = $1,000; Loans < $12,500 = 8%

#2 One of the underwriting requirements under the general definition for
Qualified Mortgages is that the borrower’s total debt-to-income ratio is not higher than 43
percent.


Transitional Qualified Mortgage

(See Note #1)

Civil Liability Risk: Conclusive Safe Harbor.

Transitional Qualified Mortgage Requirements:

Loan Points & Fees do not exceed Regulatory Threshold N
Equal Monthly Payments N
30 Year Maximum Loan Amortization N
5 Year Minimum Loan Amortization N

Transitional Qualified Mortgage Prohibitions:

Balloon Payment Prohibition N
Interest Rate Increase Prohibition N
Negative Amortization Prohibition N
Deferred Principal Payment Prohibition N
Post Consummation Transfer Requirement N

Transitional Qualified Mortgage Minimum Underwriting Criteria:

Appendix Q Standards N
Current or reasonably expected income or assets (other than the value of the property that secures the loan) that the consumer will rely on to repay the loan N
Current employment status (if you rely on employment income when assessing the consumer’s ability to repay) N
Monthly mortgage payment for this loan. You calculate this using the introductory or fully-indexed rate, whichever is higher, and monthly, fully-amortizing payments that are substantially equal N
Monthly payment on any simultaneous loans secured by the same property  
Monthly payments for property taxes and insurance that you require the consumer to buy, and certain other costs related to the property such as homeowners association fees or ground rent N
Debts, Alimony, and child-support obligations  
Monthly debt-to-income ratio or residual income, that you calculated using the total of all of the mortgage and non-mortgage obligations listed above, as a ratio of gross monthly income N
Credit history N

Transitional Qualified Mortgage Underwriting Verification: According to Program Requirements.

Notes:
#1 For a temporary, transitional period, certain loans that are eligible for sale or guarantee by a government-sponsored enterprise (GSE) – the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) – or are eligible under specified federal agencies’ guarantee or insurance programs will be considered Qualified Mortgages under a temporary definition.


Rural Balloon Payment Qualified Mortgage

(See Note #1)

Civil Liability Risk: Conclusive Safe Harbor for Non-HPML Loans; Rebuttable Presumption of Compliance Safe Harbor for HPML loans.

Rural Balloon Payment Qualified Mortgage Requirements:

Loan Points & Fees do not exceed Regulatory Threshold Y - See Note #2
Equal Monthly Payments Y - See Note #3
30 Year Maximum Loan Amortization Y
5 Year Minimum Loan Amortization N

Rural Balloon Payment Qualified Mortgage Prohibitions:

Balloon Payment Prohibition N
Interest Rate Increase Prohibition Y
Negative Amortization Prohibition Y
Deferred Principal Payment Prohibition N
Post Consummation Transfer Requirement Y - See Note #4

Rural Balloon Payment Qualified Mortgage Minimum Underwriting Criteria:

Appendix Q Standards N
Current or reasonably expected income or assets (other than the value of the property that secures the loan) that the consumer will rely on to repay the loan Y - See Note #5
Current employment status (if you rely on employment income when assessing the consumer’s ability to repay) N
Monthly mortgage payment for this loan. You calculate this using the introductory or fully-indexed rate, whichever is higher, and monthly, fully-amortizing payments that are substantially equal Y
Monthly payment on any simultaneous loans secured by the same property Y
Monthly payments for property taxes and insurance that you require the consumer to buy, and certain other costs related to the property such as homeowners association fees or ground rent  Y
Debts, Alimony, and child-support obligations Y
Monthly debt-to-income ratio or residual income, that you calculated using the total of all of the mortgage and non-mortgage obligations listed above, as a ratio of gross monthly income Y
Credit history N

Rural Balloon Payment Qualified Mortgage Underwriting Verification: 3rd Party Documentation

Notes:
#1 A "Small Creditor" has assets of less than $2 billion and in conjunction with any affiliates made no more than 500 first lien covered loans in the previous calendar year. Additionally, as of 01/11/2016 > 50% of first lien covered loans originated in the previous calendar year were secured by property located in rural or underserved counties.

#2 The following points & Fees Thresholds apply: Loans ≥ $100,000 = 3%; Loans ≥ $60,000 but < $100,000 = $3,000; Loans ≥ $20,000 but < $60,000 = 5%; Loans ≥ $12,000 but < $20,000 = $1,000; Loans < $12,500 = 8%.

#3 Other than the balloon payment.

#4 Small Creditor QMs generally lose their QM status if you sell or otherwise transfer them less than three years after consummation. However, a Small Creditor QM keeps its QM status if it meets one of these criteria: a)  It is sold more than three years after consummation; b) It is sold to another creditor that meets the criteria regarding number of originations and asset size, at any time; c) It is sold pursuant to a supervisory action or agreement, at any time; or d) It is transferred as part of a merger or acquisition of or by the creditor, at any time.

#5 Must determine that the borrower can make all scheduled payments other than the balloon payment from current or reasonably expected income and or assets.


Small Creditor Portfolio Qualified Mortgage

(See Note #1)

Civil Liability Risk: Conclusive Safe Harbor for Non-HPML Loans; Rebuttable Presumption of Compliance Safe Harbor for HPML loans.

Small Creditor Portfolio Qualified Mortgage Requirements:

Loan Points & Fees do not exceed Regulatory Threshold Y - See Note #2
Equal Monthly Payments Y
30 Year Maximum Loan Amortization Y
5 Year Minimum Loan Amortization N

Small Creditor Portfolio Qualified Mortgage Prohibitions:

Balloon Payment Prohibition Y
Interest Rate Increase Prohibition N
Negative Amortization Prohibition Y
Deferred Principal Payment Prohibition Y
Post Consummation Transfer Requirement   Y - See Note #3

Small Creditor Portfolio Qualified Mortgage Minimum Underwriting Criteria:

Appendix Q Standards N
Current or reasonably expected income or assets (other than the value of the property that secures the loan) that the consumer will rely on to repay the loan Y
Current employment status (if you rely on employment income when assessing the consumer’s ability to repay) N
Monthly mortgage payment for this loan. You calculate this using the introductory or fully-indexed rate, whichever is higher, and monthly, fully-amortizing payments that are substantially equal Y
Monthly payment on any simultaneous loans secured by the same property Y
Monthly payments for property taxes and insurance that you require the consumer to buy, and certain other costs related to the property such as homeowners association fees or ground rent Y
Debts, Alimony, and child-support obligations Y
Monthly debt-to-income ratio or residual income, that you calculated using the total of all of the mortgage and non-mortgage obligations listed above, as a ratio of gross monthly income Y
Credit history N

Small Creditor Portfolio Qualified Mortgage Underwriting Verification: 3rd Party Documentation

Notes:
#1 A "Small Creditor" has assets of less than $2 billion and in conjunction with any affiliates made no more than 500 first lien covered loans in the previous calendar year.

#2 The following points & Fees Thresholds apply: Loans ≥ $100,000 = 3%; Loans ≥ $60,000 but < $100,000 = $3,000; Loans ≥ $20,000 but < $60,000 = 5%; Loans ≥ $12,000 but < $20,000 = $1,000; Loans < $12,500 = 8%

#3 Small Creditor QMs generally lose their QM status if you sell or otherwise transfer them less than three years after consummation. However, a Small Creditor QM keeps its QM status if it meets one of these criteria: a)  It is sold more than three years after consummation; b) It is sold to another creditor that meets the criteria regarding number of originations and asset size, at any time; c) It is sold pursuant to a supervisory action or agreement, at any time; or d) It is transferred as part of a merger or acquisition of or by the creditor, at any time.