More Rate Spread Tests!

Along with the “new” general QM definition came new rate spread thresholds.  These differ based on the loan amount (adjusted annually), lien status and whether the loan is secured by a manufactured home.  The good news is that the rate spreads are based on the Average Prime Offer Rate (APOR) like other rate spread tests out there.  The bad news is, it’s difficult to keep all the different threshold tests and what they mean straight.

Say you have a $150,000 first-lien transaction with an APR that exceeds the APOR by 2%.  This loan could qualify as a “new” general QM; however, it would still be both a higher-priced covered transaction and a higher-priced mortgage loan.  And that’s just the start, you’d still need to ensure the points and fees don’t also make it a high-cost mortgage!        

On a loan where the rate can change within the first five years of the first payment due date, there are also special rules for calculating the APR used to determine the rate spread and for determining whether it’s a higher-priced covered transaction.  This APR calculation is different from how you calculate the APR for loan disclosure purposes.

Unfortunately, rate spreads aren’t all you have to worry about when originating loans that qualify under the “new” general QM definition.  Want to learn more? 


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