Will Fannie/Freddie require repurchase on loans that violate QM points + fees?
Fannie/Freddie's stance on QM points + fees, future of mobile home lending, and Massachusetts' answer to Flood insurance problems ...
Fannie/Freddie and QM points + fees
Although lenders must rep. and warrant that loans sold to Fannie or Freddie meet the QM points + fees test, Fannie and Freddie will not be enforcing QM points + fees for the time being ... potentially 6-18 months. Here's a link to Fannie's announcement on this.
What does this mean? Currently, the data fields that would be required to check QM points + fees do not exist. Although Fannie/Freddie have the authority to do some kind of post-purchase audit, they will not. Even if they actually notice a QM points + fees mistake (such as in HOEPA testing, which is now the same test as QM points + fees, but 5% instead of 3%), they will not require a repurchase. Instead they will - if anything - work with that lender on policies/procedures/systems to help avoid future mistakes. The only way a QM points + fees violation will lead to repurchase is if an authoritative body (court or regulator) finds the loan to be in violation. So, Fannie/Freddie won't force repurchase if they find the mistake themselves, but they will give it back to you if it goes to delinquency and the borrower successfully shows it to be a non-QM.
Why? Fannie/Freddie believes that lenders need more time to implement systems that will help with calculating QM points + fees, and also that further clarity is needed regarding major parts of the regulation, such as with regard to calculating bona fide discount points. Such clarifications are expected from the CFPB by this summer.
In one sense, however, this is cold comfort. A loan gets the protection of "qualified mortgage" status only if it is both eligible for sale to Fannie / Freddie and also meets other requirements, such as QM points + fees. F/F will purchase the loan only if the lender represents and warrants that it meets these requirements--the risk of delinquency and ATR liability (which everyone is worried about) is borne entirely by the lender. It's nice that they will not be checking QM points + fees, but if there is a problem and it goes to delinquency, it is the lender who will pay the ultimate price of any mistakes.
Bottom line? Make sure you're comfortable with your QM points + fees calculations ... and that goes for small creditors, lenders selling to Fannie/Freddie and everyone else.
Future of Indirect Mobile-Home Lending
Anyone lend to manufacturers/sellers of mobile homes? Well apparently the ATR/QM regulations may have a large effect on this business. As you know, these regulations apply to loans secured by a "dwelling." Dwelling is a term defined by regulation -- a boat, RV / camper, or mobile home could all be a "dwelling" depending on the use ... if any of these things is to be "used as a residence," the ATR/QM rules apply. No doubt this will mean more regulatory scrutiny to this area than before, but has anyone heard of specific problems arising?
And two notes for readers in Massachusetts ...
Massachusetts Flood Regs
Don't forget ... the time is almost up to comment on Martha Coakley's proposed changes to Flood insurance through Massachusetts regulations. The hearing is tomorrow at 1:00 pm and the bill's text is available here. Although national movement on Flood insurance may negate the need for state-level action, this bill would, among other things, limit the coverage amount to the amount outstanding on the mortgage. In other words, a lender would not be allowed to require Flood insurance on more than $40,000 of a $350,000 home where
$40,000 was the outstanding mortgage balance.
Also, the MMBA has requested specific examples of how ATR/QM has negatively affected your organization ... we encourage you to respond
to the survey or e-mail Debbie Sousa directly to make your voice heard!
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