A team member asks about ATR QM Points and Fees in a daily pipeline review while trying to apply the requirement without relying on borrower preference. Which response should a quality-control reviewer use?
Correct Answer
D) Separate discount points from ordinary fees when the rule requires it
Why this is correct: The Ability-to-Repay/Qualified Mortgage (ATR/QM) rules under Regulation Z have specific thresholds for points and fees. Certain fees (like discount points paid to buy down the rate) are treated differently from ordinary finance charges. Properly separating them is crucial for determining if a loan exceeds the points-and-fees cap and qualifies as a QM. The original explanation correctly notes points and fees affect key calculations. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because points and fees must be calculated based on the actual transaction details. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong because ATR/QM standards are legal requirements, not subject to borrower preference. "Use the ability-to-repay standard to decide the ATR QM Points and Fees issue before confirming the trigger facts" is wrong because you must first confirm the facts (the actual fees) before applying the ATR/QM standard to them. Exam tip: For QM points-and-fees tests, remember to include most finance charges and compensation to the loan originator, but exclude certain bona fide discount points.
Why This Is the Correct Answer
The correct response is "Separate discount points from ordinary fees when the rule requires it" because Points and fees can affect APR, HOEPA, QM, and borrower cost calculations.
Why the Other Options Are Wrong
Option A: Apply a different loan-program rule without checking the file facts.
Apply a different loan-program rule without checking the file facts. is not correct because it does not apply the rule tested by this file scenario.
Option B: Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan.
Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan. is not correct because it does not apply the rule tested by this file scenario.
Option C: Use the ability-to-repay standard to decide the ATR QM Points and Fees issue before confirming the trigger facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
points and fee calculations: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to points and fee calculations; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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