General Mortgage Knowledge · 20% of the SAFE examhard
Correct answer: Rebuttable presumption, because the APR exceeds the APOR by 1.70 percentage points, which is above the 1.5-point higher-priced threshold for first liens
This question requires understanding two separate but related pricing thresholds. Under HOEPA/Regulation Z, a first-lien loan is a 'higher-priced covered transaction' when its APR exceeds APOR by 1.5 percentage points or more. Here, the spread is 7.40% - 5.70% = 1.70%, which exceeds 1.50 — so this IS a higher-priced covered transaction. Separately, the General QM pricing threshold (2.25% above APOR for loans $110,000+) determines QM eligibility, and 1.70% is below 2.25%, so the loan qualifies as a QM. However, because it is both a QM AND a higher-priced covered transaction, it receives only rebuttable presumption protection — not safe harbor. "No ATR protection, because a spread of 1.70 percenta..." is wrong because not all QMs get safe harbor; higher-priced QMs receive rebuttable presumption. "Safe harbor, because the spread of 1.70% is below th..." is wrong — the loan qualifies as QM since 1.70% < 2.25%. "Rebuttable presumption, because the APR exceeds the..." confuses the two thresholds — passing the 2.25% QM pricing test does not automatically mean the loan is non-higher-priced, because the higher-priced threshold (1.5%) is lower than the QM threshold (2.25%).
CRAM ARCADE has the full NMLS question bank, timed practice exams, focus drills on your weakest category, flashcards and spaced repetition. No credit card.
Start studying free