The Consumer Financial Protection Bureau's Qualified Mortgage (QM) rule was designed to protect borrowers to ensure they don't pay excessive points and fees on their mortgage, and that ultimately, they have the ability to repay their mortgage.
|Include||Do not include|
|Refundable single premiums1||X|
|Non-Refundable single premiums||X|
|Split premiums||Upfront premium||X|
|Include||Do not include|
1 When MGIC Refundable Single Premiums are cancelled, refunds are calculated on a pro rata basis over a 5-year term. To date, the CFPB has not defined pro rata. However, on 10/17/2013, a CFPB official stated during an MBA-hosted webinar that, barring any state law defining the term, "The Bureau interprets the term pro rata to basically mean proportion… So this generally means that the refund should be proportional to the amount of the time remaining on the policy after the pay off and the total term of the policy. So if you wanted to do it mathematically you would say: 'refund equals total premiums times the time remaining over the term of policy.'" Given this statement by the CFPB and because our refund schedule is based on only a 5-year term, we believe our refundable single premiums should be included in the QM Points and Fees Calculation.
2 Include any split premiums monthly premium required to be paid into escrow at closing. Do not include monthly premium payable after closing.
For loans that don't quite fit QM requirements and are otherwise good, solid portfolio prospects, use our Underwriting Requirements for Standard Loans, which allow:
As of Jan. 10, 2014, you must assess the borrower's ability to repay for virtually all closed-end residential mortgage loans. All Qualified Mortgages (QM) are presumed to comply with this requirement. As described below, a loan that meets the product feature requirements can be a QM under any of three main categories: (1) the general definition; (2) the "GSE-eligible" provision; or (3) the small creditor provision.
Mandatory product feature requirements for all QMs
Three main QM categories
EXTRA NOTE: Even if a loan is not a qualified mortgage, it can still be an appropriate loan.
You can originate any mortgage (whether it is a QM or not) as long as you make a reasonable, good-faith determination that the consumer is able to repay the loan based on common underwriting factors. You can continue to rely on your sound, tested underwriting guidelines that you have used in the past to make loans that have generally performed well, as long as you document the information you consider.
Learn more about the Ability to Repay Rule: www.consumerfinance.gov/Regulations.