Mortgage Quality Control: Qualified Mortgage (QM) Audits

Mortgage Quality Control (QC) Audits | Servicing QC Audit | MCA

In response to the CFPB Qualified Mortgage (QM) rule, MetaSource offers a QM review. We will review restricted terms, points and fees, and ability to repay when assessing QM status. These reviews will begin on all loans originated after January 10, 2014.

Explain the Ability to Repay Requirement/QM Rule

The final rule published by the CFPB requires lenders to, at a minimum, consider and verify eight (8) specific underwriting factors in order to make a reasonable and good faith determination of the borrower's ability to repay a loan, using reasonably reliable third-party records.

  1. Borrower's current or reasonably expected income or assets, except for the value of the dwelling that secures the loan;
  2. Borrower's current employment status (if employment income is being used to qualify);
  3. Borrower's monthly payment on the covered transaction, calculated in accordance with the Rule;
  4. Borrower's monthly payment on any simultaneous loan the creditor knows or has reason to know will be made, calculated in accordance with the Rule;
  5. Borrower's monthly payment for mortgage-related obligations;
  6. Borrower's current debt obligations, alimony, and child support;
  7. Borrower's monthly debt-to-income ratio (DTI) or residual income, calculated in accordance with the Rule;
  8. Borrower's credit history

QM Definitions

Non-Qualified Mortgage

  • Does not meet ATR; or
  • Does not meet any criterion of a covered mortgage*; or
  • DTI > 43%; or
  • Does not meet FHA, VA, or GSE automated underwriting; or
  • Outside of GSE or FHA lending limits

QM Rebuttable Presumption

  • Meets ATR; and
  • DTI ≤ 43%; and
  • Rate > 1.5% above APOR

OR

  • Meets FHA, VA, or GSE automated underwriting**; and
  • Rate > 1.5% above APOR

QM Safe Harbor

  • Meets ATR; and
  • DTI ≤ 43%; and
  • Rate ≤ 1.5% above APOR

OR

  • Meets FHA, VA, or GSE automated underwriting**; and
  • Rate ≤ 1.5% above APOR

*All QM loans must have fees < 3% of the total loan amount if the loan is greater than $101,749. QM loans cannot have interest-only, negative amortization, or balloon payment features and then loan term must not exceed 30 years.

**For 7 years (until 2021) or until agency chooses its own QM definition.

Note: Max DTI under Automated Underwriting: GSE (45%-50%), FHA (50%-55%, 43% if FICO < 620), VA (45%-55%)

Note: Current Max DTI for private MI is 41%

What Does a QM Audit Include?

We will include a review of the ability to repay component of the QM rule as part of our existing post-close audit reviews. The results of these reviews will reflect on the report and will be of no additional charge to the client.

Also offered as an optional, additional service review of the QM rule including an assessment of the loan's points and fees for an additional cost of $20 per loan if done in addition to a loan file QC audit. We will independently verify that loans meet QM standards regarding points and fees rules and restrictions. A copy of the QM analysis report will be provided to you along with our QM Determination.

MetaSource also offers the QM Reviews as a standalone service for $25 per file.

Contact us to learn more about our qualified mortgage (QM) compliance audit service