CFPB Small Entity Compliance Guide for ATR-QM: A Closer Look at the QM Points and Fees Caps

Written by Michael Coleman, Regulatory Compliance Counsel

Last week we blogged in more detail about the CFPB’s Small Entity Compliance Guide on escrow requirements for higher priced mortgage loans (“Escrow Guide”) from the recent final rule. Today we would like to take a closer look at the CFPB’s Small Entity Compliance Guide for the Ability to Repay/Qualified Mortgage final rule (“ATR/QM Guide”), which we mentioned in this blog post a few weeks ago.

Similar to the Escrow Guide, the ATR/QM Guide attempts to explain this very complicated rule in plain English, and the ATR/QM Guide is broken up into relatively easy to digest sections:

1. Introduction
2. Overview of the Ability-to-Repay/Qualified Mortgage Rule
3. About Ability to Repay
4. About Qualified Mortgages
5. Refinancing from Non-Standard to Standard Loans: ATR Special Circumstance (§ 1026.43(d))
6. Proposed Changes to the Ability-to-Repay/Qualified Mortgage Rule
7. Practical Implementation and Compliance Considerations
8. Other Resources

Today we’d like to highlight the discussion on the calculation of points and fees caps for qualified mortgages, located in section 4 of the ATR/QM Guide, starting on page 31. This particular section of the ATR/QM Guide gives a brief description of the points and fees caps contained in the qualified mortgage rule, section 1026.43(e)(3), and the fact that the fixed dollar caps will be updated annually in the Regulation Z commentary. The ATR/QM Guide then gives a nice break down of the definition of "points and fees" as contained in section 1026.32(b)(1) - which is cross referenced in section 1026.43(e)(3) - into its six categories:

1. Finance charge;
2. Loan originator compensation;
3.  Real estate-related fees;
4. Premiums for credit insurance; credit property insurance; other life, accident, health or loss-of-income insurance where the creditor is beneficiary; or debt cancellation or suspension coverage payments;
5. Maximum prepayment penalty; and
6. Prepayment penalty paid in refinance. 

Each section of the breakdown contains a nice summary of the charges and what must be included and what can be excluded from the "points and fees" calculation.  The ATR/QM Guide is a good place to start your research and wrap your head around the concepts. 

However, these calculations will undoubtedly be complex (and fact specific based on the fees that your credit union charges), so there is no substitute for digging into the sections themselves and the commentary when making your calculations. 

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