Guide to the Ability-to-Repay Rule and Qualified Mortgages

Understand the ability-to-repay rule, qualified mortgages, and how to successfully conduct your business inside their frameworks

The new ability-to-repay rule and its qualified mortgage standard, which became effective in January 2014, are likely to change the course of business for nearly every player in the residential finance industry. Servicers must now evaluate their pricing and profitability models to determine if they need to lower some prices to stay competitive on QM loans, or raise other prices to make a reasonable return for handling non-QM loans. The secondary market must examine the risk potential and determine what strictures to place on loans they buy. Originators bear most of the burden, though, needing to adhere to new strictly outlined underwriting standards, avoid products with forbidden features and adhere to new document-management processes that preserve and organize records, and with them legal protection.

The scope of the upheaval is enormous. But also daunting is the complexity: The CFPB needed 804 pages to communicate the regulation and took most of 2013 vetting possible extensions, exceptions, interpretations and guidance. The mortgage market had just one year to get everything up and running, and entered 2014 still uncertain of whether the actions they had taken would satisfy the CFPB.

In the Guide to the Ability-to-Repay Rule and Qualified Mortgages from Inside Mortgage Finance, newly updated in October 2013, you’ll find a concise examination of the rule, its requirements, and its impacts. Learn what it takes to stay within the ability-to-repay restrictions, what constitutes a qualified mortgage and how the repercussions are likely to affect your business.

Use this special report as your roadmap to the ATR rule and what you can do to run a successful mortgage business within the rule's confines.


Partial Table of ContentsGuide to the Ability-to-Repay Rule and Qualified Mortgages

Ability-to-Repay Requirements

  • Types of Mortgages Covered by the ATR Rule

  • Ways to Comply with the ATR Rule

  • Safe Harbor QMs

  • Safety of the Safe Harbor Questioned

  • Rebuttable Presumption QMs

  • Assignee Liability

  • Transition Guidance from the GSEs

  • HUD's Proposed QM Rule

  • Non-Government QM Originations

  • Guidance on QM Interest Rate Calculation

  • Concerns with Use of APOR

  • Borrowers with Non-Standard Income

  • Liability for Non-QMs

  • Refinancing Nonstandard Mortgages

  • Prepayment Penalties

  • Recordkeeping Requirements

  • Exemptions from ATR Requirements

Industry Reaction

  • Impact on the Secondary Market

  • Impact on Non-Agency Jumbo Originations

  • Impact on Subprime Originations

  • Impact on Servicing

  • Fair Lending Concerns

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After the November elections, how long will it take for a new Congress and White House to pass GSE reform legislation?

I’m confident a bill will be passed the first year.


2 to 3 years. GSE reform is complicated.


Sadly it won’t happen in a Clinton or Trump first term.


Not in my lifetime.


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