A lender charges a 1% origination fee on all loans. For a borrower obtaining a $250,000 mortgage, what is the maximum origination fee that can be charged without violating the points and fees test under the ATR/QM rule for a first-lien mortgage?
Correct Answer
B) $7,500
Under the ATR/QM rule, for loans of $100,000 or more, the points and fees cannot exceed 3% of the total loan amount to qualify as a Qualified Mortgage. For a $250,000 loan, 3% equals $7,500. While the lender wants to charge 1% ($2,500), the question asks for the maximum allowable, which is $7,500.
Why This Is the Correct Answer
Under the ATR/QM rule, for loans of $100,000 or more, the points and fees cannot exceed 3% of the total loan amount to qualify as a Qualified Mortgage. For a $250,000 loan, 3% equals $7,500. While the lender wants to charge 1% ($2,500), the question asks for the maximum allowable, which is $7,500.
More Mortgage Knowledge Questions
A borrower is comparing two loan offers: Loan A has no points and 4.5% interest rate, Loan B has 2 points and 4.0% interest rate. The loan amount is $400,000. How much will the borrower pay upfront for the points on Loan B?
Under what circumstances can a Qualified Mortgage include a prepayment penalty?
A borrower is considering paying discount points to reduce their interest rate. Each point costs 1% of the loan amount and reduces the rate by 0.25%. On a $300,000 loan, how much would the borrower pay for 2 discount points?
A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
Under TRID regulations, discount points must be disclosed on the Loan Estimate in which section?
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