The Consumer Financial Protection Bureau released a fact sheet on the interest rate used to calculate prepaid interest for qualified mortgages under the price-based General QM definition.
Background: The fact sheet addresses how to calculate the annual percentage rate for “short-reset” adjustable-rate mortgages and step-rate loans, in which the interest rate changes within five years of the date on which the first regular periodic payment is due.
Details: According to the fact sheet, creditors must treat the maximum interest rate that may apply during that five-year period as the interest rate for the full term of the loan when determining the APR for the price-based QM definition.
More: This special rule also applies for the purpose of determining whether the loan receives a conclusive or a rebuttable presumption of compliance with the ability-to-repay requirement.