Ability to Repay and Qualified Mortgage Rule


The Consumer Financial Protection Bureau adopted a rule that implements the Ability to Repay and Qualified Mortgage (“ATR/QM”) provisions of the Dodd-Frank Act. The effective date of the ATR/QM rule is with initial applications taken on or after January 10, 2014.


  • For loans subject to the ATR/QM rule, Pennymac will only purchase loans that comply with the requirements.
    • Investment properties which are for business purposes (borrower does not intend to occupy for greater than 14 days in the year) are exempt from ATR/QM; however, such loans must meet agency eligibility requirements and are subject to the applicable points and fees threshold.
    • Investment property cash-out transactions cannot be considered exempt if the proceeds are used for consumer purposes. If a borrower receives cash proceeds, Pennymac may require a Borrower Attestation confirming the use of the funds are for business purposes.
  • Correspondents are responsible for providing evidence of compliance with the ATR/QM rules.
  • Pennymac does not accept cures on QM points and fees violations.

Evidencing Compliance with QM Points and Fees

Clear itemization of fees and application of all credits that indicate paid by/to will be required on all loans. Pennymac will accept a broad number of documents as evidence of compliance. Acceptable forms of evidence include, but are not limited to:

  • Final Closing Disclosure
  • Business Purpose Attestation
  • Attestation of cash out proceeds
  • Affiliate documentation

Bona Fide Discount Points

To verify the exclusion of bona fide discount points from the points and fees calculation, Pennymac will require:

  • Evidence of the Starting Adjusted Rate (a.k.a. Base Rate) and points, and corresponding LLPA-adjusted “rate stack” or rate sheet with non-LLPA adjusted “rate stack” and LLPA grids; and
  • Evidence of the delivery price to the consumer (i.e. rate/lock confirmation).
  • Both of the foregoing must be from the date the interest rate was last set.