For QMs that are "higher-priced covered transactions" (Higher-Priced QMs), however, the presumption may be rebutted (basically by showing that, when the loan closed, the consumer's monthly income less his/her monthly Debt Obligations, including the monthly payment on the loan, was insufficient to cover his/her living expenses).
For QMs that are not "higher-priced covered transactions," this presumption provides the creditor with a safe harbor against potential liability for violating the rule 9. Because creditors may not be certain whether their ATR determinations are reasonable in a particular case, the ATR/QM Rule defines a category of loans – QMs – for which a creditor "may presume that the loan has met" the ATR requirements. The ATR/QM Rule generally provides that creditors may not make a "covered transaction" (essentially, a residential mortgage loan that does not qualify for any of the exemptions in the rule) unless they make a "reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to its terms." 7 To be considered to have made such a determination, creditors must consider, and verify (in most cases using reasonably reliable third-party records) the consumer's: current or reasonably expected income or assets (other than the value of the dwelling) employment status monthly payment on 1) the covered transaction, 2) any simultaneous loan that the creditor knows or has reason to know will be made, and 3) for mortgage-related obligations current debt obligations, alimony, and child support (Debt Obligations) monthly debt-to-income (DTI) ratio or residual income and credit history. This Holland & Knight alert provides a brief recap of the existing ATR/QM Rule, followed by pertinent details concerning the most significant changes effected by each of the two final rules. However, the Amended General QM Rule has a mandatory compliance date of July 1, 2021, which means that, for applications received on or after March 1, 2021, but before July 1, 2021, lenders may continue to make GSE QMs or choose instead to make General QMs under the new Amended General QM Rule. Both final rules become effective on March 1, 2021. The other final rule ( Seasoned QM Rule) 6 adds a new QM category (Seasoned QMs). One of the two final rules ( Amended General QM Rule) 5 modifies the requirements for a loan to qualify as a General QM as well as certain other provisions in the ATR/QM Rule and eliminates the GSE QM category (set to expire for applications received on or after the mandatory compliance date of the Amended General QM Rule). 3 Because of this, the ATR/QM Rule also gives lenders certain protections from such liability when making any one of several categories of "qualified mortgages" defined in the ATR/QM Rule, including a general category of QMs (General QMs) 4, the aforementioned GSE QM category and several other categories that are not affected by the final rules. However, evaluating consumers' ability to repay is complicated and can result in significant liability for lenders if they get it wrong. The ATR/QM Rule generally requires lenders, before making a residential mortgage loan to a consumer, to make a reasonable good faith determination of the consumer's ability to repay the loan according to its terms. 1 The principal purpose of these final rules is to avoid anticipated problems concerning mortgage credit availability following the scheduled expiration on Jof the so-called "GSE Patch," a temporary category of qualified mortgages (QMs) created as part of the original ATR/QM Rule for loans that are eligible for purchase by Fannie Mae or Freddie Mac (government-sponsored enterprises or GSEs), while operating under the conservatorship or receivership of the Federal Housing Finance Agency (GSE QMs). The Consumer Financial Protection Bureau (CFPB) recently published two final rules revising its Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule).
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