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Resources to Help You Better Understand the Qualified Mortgage Rule

On January 10, 2014, the Qualified Mortgage (QM) Rules issued by the CFPB took effect. Among these rules, there is a provision related to treatment of upfront mortgage insurance premiums and when those costs must be included in the rule’s 3% “points and fees test.” Private MI premiums paid by consumers after closing, such as Arch MI’s EZ Monthly product, are excluded from the points and fees test.

For further information on the QM rules, please refer to the following links:*

CFPB Rule Implementation
Basic Guide for Lenders
General Comparison of ATR Requirements with QM
CFPB Readiness Guide
ATR and QM: Small Entity Compliance Guide

Product Grid



iNCLUDE EXCLUDE
Borrower-Paid Premiums
EZ Monthly/Monthly

 Level Annual
 

Single Premium** (Refundable/Non-Refundable)




Lender-Paid Premiums

Monthly


(Subject to APOR Calculation)

Single


(Subject to APOR Calculation)

* Arch MI is providing internet links that may be useful in understanding QM requirements. However, Arch MI cannot ensure the continuing currentness or accuracy of the information on these third-party sites.

**The QM rule provides that the entire single premium, or a portion thereof, may be excluded from QM’s points and fees test if it is less than the FHA upfront premium, which is currently 175bps (amounts in excess of this must be included in the points and fees test), and is refundable on a “pro-rata”basis. The CFPB has not published any guidance as to the meaning of “pro-rata” related to single premium private MI. However, CFPB officials have indicated informally that “pro-rata” means that the “refund should be proportional to the amount of time remaining over the term of the policy.” In light of this statement, and given that Arch MI’s refund schedule is based on a 5 year term, we have classified our refundable single premiums and the upfront portion of our split premiums as included in the QM Points and Fees calculation.

The information included herein is not a legal opinion or legal advice. Lenders are cautioned to seek advice from their own legal counsel regarding the Qualified Mortgage requirements.