Small Creditor QM Confusion

A “small creditor” is defined in 1026.35(b)(2)(iii).  Although this definition is located within the requirements for Jerod11Higher Priced Mortgage Loans (HPMLs), portions of it are also referenced under the Qualified Mortgage (QM) requirements.  However, within the QM requirements, the small creditor definition will differ depending on which QM status you’re addressing.  For example:

When looking at whether you are a small creditor for rural balloon payment QM purposes [see 1026.43(f)(vi)], we look at the following criteria:

  1. The lender has an asset size of less than $2 billion*;
  2. The lender and any affiliates together originate no more than 500* consumer purpose first lien dwelling secured loans; and,
  3. More than 50%* of the lender’s consumer purpose first lien loans secured by a dwelling are located in counties deemed to be “rural” or “underserved”.

*The above thresholds apply to the prior calendar year.

When looking at whether you are a small creditor for portfolio QM purposes [see 1026.43(e)(5)(i)(D)], you only need to meet #1 and #2 above.

However, the rural balloon QM includes a two-year transition period where the “rural and underserved” portion (#3 above) will not apply.  This means that for two years (from January 2014 until January 2016) a “small creditor” for a rural balloon QM and a portfolio QM will be exactly the same.

Jerod Moyer

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