Certain loan fees that Fannie Mae and Freddie Mac charge to cover default risk appear to count towards a points and fees test lenders cannot exceed in making qualified loans.
“Loan level price adjustments appear to count in the 3% points and fees test,” according to Rod Alba, regulatory counsel for the American Bankers Association.
The Consumer Financial Protection Bureau also is moving toward including loan officer compensation in the
“When you mix those two elements together, you exceed 3% and the loan no longer qualifies for QM status,” Alba said Thursday at ABA’s real estate lending conference in New Orleans.
The regulatory counsel noted that ABA is communicating with the regulators to make sure they understand the impact of LO comp and loan level price adjustments.
Dechert law partner Thomas Vartanian also warned the bankers that limiting their loan product solely to QM loans could get them in trouble with fair lending and the new disparate impact standard that HUD and the CFPB have adopted.
Such conservative lending standards will cut out 25% to 35% of current production which will impact low-income and minority borrowers the most.
“We need further clarification from these agencies so we won’t get into trouble for disparate impact,” Vartanian said at the conference.
