A borrower has a credit score of 640 and applies for a loan with a 5% interest rate when the APOR for comparable transactions is 4.5%. What additional ATR documentation is required?
Correct Answer
A) No additional documentation since it's not a higher-priced mortgage loan
Under 12 CFR 1026.35, a loan is considered higher-priced when the APR exceeds the APOR by 1.5 percentage points for first liens. Since 5% is only 0.5 percentage points above the 4.5% APOR, this is not a higher-priced mortgage loan and no additional ATR requirements apply beyond standard verification.
Why This Is the Correct Answer
Under 12 CFR 1026.35, a loan is considered higher-priced when the APR exceeds the APOR by 1.5 percentage points for first liens. Since 5% is only 0.5 percentage points above the 4.5% APOR, this is not a higher-priced mortgage loan and no additional ATR requirements apply beyond standard verification.
More Federal Laws Questions
A mortgage broker's website states 'Qualified borrowers can get loans with down payments as low as 3%.' Which statement about TILA advertising requirements is correct?
A loan's APR increases from 4.25% on the Loan Estimate to 4.35% on the Closing Disclosure due to a rate lock expiration. What action is required?
A lender originates a mortgage that meets all QM requirements. Three years later, the borrower defaults and claims the lender violated the ATR rule. What legal protection does the lender have?
For a closed-end mortgage loan, when must the creditor provide the Closing Disclosure to the borrower?
Which of the following documents must be provided to trigger the start of the 3-day rescission period?
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