QM, and whether or not a loan will meet those standards, is the hot and complex topic right now. Like all substantial changes, it is time to start putting in the methodologies that will result in the mortgages you want to produce; without the fear of not meeting the QM test. (Unless non-QM’s are your desired results.)
I’ve worked through this over the last week and I hope this helps to get your thoughts more organized as we begin to prepare for January. Today I will focus on the basics and tomorrow the calculations and steps to the methodology.
To Prepare for The Test Consider the Following:
1. APOR and your ability to access this index.
2. What will go into your points and fees calculation (I have prepared a chart and will post that shortly)
3. How you will convert your points and fees into a percentage or basis points to determine your maximum profitability on a loan.
4. Adding the points and fees and loan income to fall at or below the 3%.
5. The fees in the APR do not equal the fees in the points and fees calculations. Those are two different computations.
6.The “test” on how you will know if 1 or 2 “bona fide” discount points can be applied.
7. A discussion on how “bona fide” discounts can be applied.
8. The distinction between a “high cost” and “high priced” mortgage loan.
9. The APOR to APR test.
10. Documenting this entire process for examination purposes.
Stay tuned as we begin to dissect this process.