Federal Mortgage LawsQuestion 64 of 400
When underwriting an adjustable-rate Qualified Mortgage, the monthly payment used to evaluate the consumer's ability to repay must generally be calculated using:
a.The initial teaser rate only
b.The lowest possible rate over the loan's life
c.The maximum interest rate that could apply in the first five years (or the fully indexed rate, whichever is greater)
d.The average of all rates over the loan term
Explanation
For ATR/QM purposes, the payment on an adjustable-rate mortgage must be calculated using the greater of the fully indexed rate or the introductory rate, and a monthly payment that fully amortizes the loan; for many ARMs the rule requires using the maximum rate in the first five years. Using only the low teaser rate would understate the true payment burden and is not permitted.
Law Reference: Ability-to-Repay/Qualified Mortgage Rule (Reg Z 1026.43)Practice all 400 questions free — no signup required.
Related questions on this topic
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