QM Training - Michigan Mutual

Report
January 2014
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Effective January 10th:
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QM Loans (safe harbor only)
No High Cost loans (section 32)
No Higher priced loans (section 35)
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Points and Fees cap
Definition of Total Loan amount for testing
Broker Compensation
Affiliated Business Arrangements
3rd party processing fees
Seller Paid Fees
Bonafide Discount
203k and 4506T Fees
Conventional MI
Ability to Repay
Underwriting requirements
New Disclosure Requirements
Affiliated Business Arrangement
Homeownership Counseling Disclosure
GFE process changes
Fees Detail Worksheets
Effective January 18th:
Appraisal Delivery
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Process to ensure timely delivery
New Disclosure Requirements

Borrower’s Authorization and Consent to
Receive Electronic Mortgage Loan
Documents
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Appraisal Delivery Timing Waiver
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Right to Receive Appraisal Notice
Detailed trainings will be held throughout the
week with the individual Ops departments to
review their specific policies and procedures.

The components of the Qualified Mortgage Rule:
 Prohibit certain risky features and practices
 Points and fees caps
 Determining/documenting the borrower’s Ability to Repay
(ATR)
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MIMUTUAL WILL ONLY ACCEPT LOANS THAT ARE CONSIDERED
A QUALIFIED MORTGAGE THAT MEET THE “SAFE HARBOR”
REQUIREMENT AS DEFINED IN THE FINAL RULES ISSUED BY
THE CFPB. THIS IS EFFECTIVE FOR ALL LOANS ORIGINATED ON
OR AFTER JANUARY 10, 2013.
Important: Effective February 1st we will apply the new QM Rules
based on the date the submission is accepted by MiMutual, or for
FHA loans, the case # assignment date. For the interim, we will use
the date the 1003 application was signed and dated by the borrower.
o No High Cost Loans (Section 32)
o No Higher Priced Loans (Section 35)
o
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Loans (except FHA) which at the time the interest rate on the loan was
set, the APR was 1.5 percentage points or more over the Average Prime
Offer Rate (APOR)
FHA loans which at the time the interest rate on the loan was set, the APR
was 1.15% + the Annual MIP, over the Average Prime Offer Rate (APOR)
Points and Fees Cap
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Points and Fees Included in the 3pt rule:
◦ Fees paid by the borrower, charged /payable to a broker or broker
affiliate
◦ Fees paid by the borrower, charged /payable to the lender or
lender affiliate
◦ Certain charges or premiums for credit insurance and other
products
◦ Compensation paid by creditor to broker
◦ Fees charged by a 3rd party (settlement agent, attorney, escrow or
title company) only if the creditor retains a portion of the thirdparty charge, to the extent of the portion retained.
◦ Fees charged by a mortgage broker (including fees paid by the
consumer directly to the broker or to the creditor for delivery to
the broker).
 Points
and Fees Excluded in the
3pt rule:
◦ Broker Affiliated fees related to real estate transactions will
not be included in the points and fees test. These fees are
for title examination, abstract of title, title insurance, or
property survey.
◦ Bonafide third party processing fees from non-affiliated
companies.
◦ Seller paid fees
◦ Bonafide Discount
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Points and Fees Test
◦ MiMutual will test for the 3pt rule at the beginning and
throughout the process. This test is based off the total
loan amount which is defined as the amount financed on
the loan, less non-APR fees that are paid to an affiliate and
financed in the loan amount.
◦ If at any point the test does not pass, an email will be sent
to the broker indicating that they will need to contact
Secondary to resolve the issue.
◦ A condition will also be added in MB indicating the points
and fees test has failed and must be resolved.

MiMutual Compensation Policy
◦ Effective Jan 10th MiMutual lender comp for all broker comp
plans will be set at the lower of 2.75% or their current comp
plan.
 Beginning February 1st, if a new comp plan has not been submitted
all new loan submissions will go to Due Diligence until a new comp
plan agreement is provided.
◦ Additional compensation will not be allowed for brokers
with a comp plan over 2%. For brokers at or below 2%
additional comp will be capped at $795.
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Affiliated Business Arrangements
◦ All broker/lender Affiliated Business Arrangements must be
disclosed and the fees itemized by invoice to identify any
amount being retained by the affiliate (those fees are not
required to be itemized on the GFE).
◦ When MiMutual is aware of a broker affiliated relationship
we will reach out to request the above itemized invoice so
that it can be accounted for in the points/fees test.
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Third Party Processing fees
◦ Bonafide third party processing fees will be allowed for
brokers on both lender and borrower paid transactions
 Allowed up to $795.
 Must be disclosed in box 1 of the GFE, as this is
still an APR fee.
 Invoice (transaction specific); and
 Processor NMLS #; and
o Processing Company NMLS #; or
o Business License for Processing Company; or
o Processing Company information reflects on the
Processor’s NMLS as the current employer.
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Seller Paid Fees
◦ Fees charged to the seller and reflected on the seller’s side
of the HUD-1 are not included in the points and fees test.
Fees customarily charged to the borrower and reflected on
the borrower’s side of the HUD-1, MUST be included in the
test.
◦ When it has been negotiated that the seller is paying for
fees associated with the transaction, MiMutual will first
apply the credit to non-APR charges on the HUD-1. Any
remaining credits may then be applied toward APR charges
and excluded from the points and fees test. Borrower paid
compensation can never be paid by the seller.
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Bonafide Discount Points
◦ You may exclude up to 2 Bonafide discount points if the
interest rate before the discount does not exceed the APOR
for a comparable transaction by more than one percentage
point; or
◦ You may exclude up to 1 Bonafide discount point if the
interest rate before the discount does not exceed the APOR
for a comparable transaction by more than 2 percentage
points.
Note that this will be set at rate lock and a discount point is “Bonafide” if it
reduces the consumer interest rate by an amount that reflects established
industry practice, such as secondary market norms.

203k Supplemental Origination Fee
◦ MiMutual is temporarily suspending the collection of this
fee.
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4506T Processing Fee
◦ MiMutual is no longer collecting a separate fee associated
with the processing of 4506T’s.
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Conventional MI
◦ All Borrower Paid Single Premium MI (refundable and nonrefundable) will be included in the points and fees
calculation.
◦ The following MI options are excluded from the points
and fees calculation:
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All borrower-paid monthly premiums
All lender-paid premiums”
NOTE: MiMutual does not offer lender-paid monthly
premiums, or split premium mortgage insurance.
Ability To Repay
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The ATR Rule requires that you make a reasonable, goodfaith determination before or when you consummate a
mortgage loan that the consumer has a reasonable ability to
repay the loan, considering such factors as the consumer’s
income or assets and employment status (if relied on)
against:
◦ The mortgage loan payment
◦ Ongoing expenses related to the mortgage loan or the property
that secures it, such as property taxes and insurance required for
the consumer to buy
◦ Payments on simultaneous loans that are secured by the same
property
◦ Other debt obligations, alimony, and child support payments
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The rule also requires you to consider and verify the
consumer’s credit history.
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A reasonable, good-faith ATR evaluation must include the following
eight ATR underwriting factors:
1. Current or reasonably expected income or assets (other than the value of
the property that secures the loan) that the consumer will rely on to repay
the loan
2. Current employment status (if you rely on employment income when
assessing the consumer’s ability to repay
3. Monthly mortgage payment for this loan. You calculate this using the
introductory or fully-indexed rate, whichever is higher, and monthly,
fully-amortizing payments that are substantially equal
4. Monthly payment on any simultaneous loans secured by the same
property
5. Monthly payments for property taxes and insurance that the consumer is
required to buy, and certain other costs related to the property such as
homeowners association fees
6. Debts, alimony, and child support obligations
7. Monthly debt-to-income ratio or residual income, that you calculated
using the total of all the mortgage and non-mortgage obligations listed
above, as a ratio of gross monthly income
8. Credit history
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Underwriting Requirements
◦ The underwriter is responsible for ensuring the loan is in
compliance with the 8 underwriting factors associated with
ATR, and will not approve any loans based on *stated
income.
*Non-credit and income qualifying streamlines are exempt from meeting
ATR requirements, and are still defined as a Qualified Mortgage, providing
all Agency guidelines are met.
◦ The borrower’s Ability to Repay must be documented on every
loan.
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Documenting the ATR
◦ All income calculation worksheets must be completed and
clearly indicate the income used for qualifying.
◦ Complete the “Income and Debt Analysis worksheet”
generated thru Mortgage Builder. This worksheet will
demonstrate the underwriter’s analysis in determining the
borrower’s ability to repay.
◦ The Final findings, income calculation worksheets and
income/debt analysis must all be consistent and
representative of the income and debts used to qualify.
Disclosures
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Affiliated Business Arrangement
◦ This disclosure will be required on all loans to indicate
whether or not the broker has an affiliated relationship.
◦ If this is not provided at the time of submission, this will be
conditioned for by the processor.
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Homeownership Counseling Disclosure
◦ MiMutual will require the signed “Acknowledgement of
Receipt of RESPA’s Homeownership Counseling
Organizations List” dated within 3 days of application,
along with the actual list of Counseling Agencies
(pulled by property zip code) that was provided to the
borrower(s). A local list of Housing Counselors can be
found through the CFPB website at:
www.consumerfinance.gov/find-a-housing-counselor
◦ If this is not provided at the time of submission, this will be
conditioned for by the processor.
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GFE Process
◦ Upon review of the GFE, if all fees are disclosed accurately
but the loan fails the points and fees test, MiMutual will:
 Notify the customer and Secondary via email
 Disclose the TIL with the higher fees and complete the
submission process.
◦ Effective February 1st, upon Review of the GFE, if all fees are
NOT disclosed accurately and the GFE is deemed
unacceptable, the loan will be cancelled and the broker will
be required to make the necessary corrections and upload a
new submission.
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Fees Detail Worksheet
◦ The information on the itemized fee detail worksheet is
necessary to ensure proper calculation of the points and
fees test and proper disclosure of the Truth-in-Lending by
MiMutual.
◦ This document is part of the minimum submission
requirement and the application will not be accepted
without this information.
Appraisal Delivery
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Effective with all applications on or after January 18, 2014, all
valuation tools used in the underwriting decision must be
delivered to the customer by the creditor. This includes:
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Appraisals
Desk Reviews
AVM’s/BPO’s
AUS Findings if a valuation is identified (FHLMC HVE value)
Upon the underwriter’s approval of the appraisal/valuation
tools used in the value determination, MiMutual must deliver
the pertinent documents to the customer within 7 days.
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Process to ensure timely delivery
◦ Once the appraisal has been approved, meaning no
revisions/changes needed and any desk review required
has been reviewed and deemed acceptable, the underwriter
will enter the “Appraisal Approved Date” in MB.
◦ This will trigger the loan to appear on the File Support
Dashboard to be delivered to the customer.
◦ File support will send all Appraisals and Desk Reviews
located in DocVelocity directly to customer via secure email.
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There are two new Application Disclosures that will be
required at time of submission to MiMutual:
◦ Borrower’s Authorization and Consent to Receive Electronic
Mortgage Loan Documents
◦ Appraisal Delivery Timing Waiver
The submission will be placed in “Due Diligence” until these
disclosures are received.
Upon acceptance of the submission package, MiMutual will
send out the “Right to Receive Appraisal Notice” directly to
the customer.
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QM Rules effective with applications accepted on or after
January 10, 2014
Appraisal Delivery requirements effective with applications
accepted on or after January 18, 2014
Detailed trainings will be held throughout the week with the
individual Ops departments to review their specific policies
and procedures.

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