The CFPB brought some changes to the Qualified Mortgage (QM) world in 2021, including a revised definition for General QMs. This revised definition included rate spread thresholds that vary with the loan amount. For loans that may or will have a rate change within the first five years of the first payment due date, there are special rules for calculating the APR to be used when determining the rate spread.
The CFPB recently issued a Factsheet regarding this special rule, which might suggest it’s seeing some errors. For these types of loans, the APR used to determine the rate spread must be based on the highest possible interest rate that could apply during that five-year period as being in effect for the full loan term. This same APR is also to be used to determine whether the loan qualifies for a conclusive or rebuttable presumption of compliance. However, this APR will likely be different than the APR you will otherwise use for disclosure purposes.
If you have loans with adjustable interest rates and are interested in obtaining QM status, it’s a good idea to see what APR your system is using to determine whether the loan meets the revised General QM criteria and/or for determining whether the loan has a conclusive or rebuttable presumption of compliance.
Ready to learn more about Qualified Mortgage compliance? Be sure to join us for our webinar “Ability to Repay, QM, High-Cost & Higher-Priced Mortgage Loans”