A factsheet on the interest rate used for calculating prepaid interest under certain mortgage lending rules was issued Wednesday by the federal consumer financial protection agency.
The Consumer Financial Protection Bureau (CFPB) said the fact sheet is on the interest rate used for calculating the prepaid interest under the price-based general qualified mortgage (QM) annual percentage rate (APR) calculation rule for certain adjustable-rate mortgages (ARMs) and step-rate loans.
“Creditors that wish to make qualified mortgages (QMs) under the price-based General QM definition must calculate the annual percentage rate (APR) for loans to determine whether they satisfy the price-based General QM definition,” the fact sheet notes. “The priced-based General QM definition contains a special rule for calculating the APR for loans where the interest rate may or will change within the first five years after the date on which the first regular periodic payment will be due. These loans are sometimes referred to as ‘short-reset’ adjustable-rate mortgages (ARMs) and step-rate loans.”
The CFPB said the factsheet describes the interest rate that is used for calculating prepaid interest for purposes of this special APR calculation rule.
The fact sheet refers to the final rule issued by the CFPB in April of last year extending the mandatory compliance date of the General QM final rule. The fact sheet includes sections on the interest rate used to calculate the APR under the General QM ARMs special rule; and the interest rate used to calculate prepaid interest under the General QM ARMs special rule