22. What types of mortgages are covered by question PM14 related to a borrower’s ability to pay back a mortgage loan product?

Question PM14 asks whether the underwriting standards for the Applicant’s covered mortgage loan products (as well as for its consumer and/or small business loan products) include an assessment of the borrower’s ability to pay back the loan. For purposes of this question PM14, a covered mortgage loan product is limited to a consumer credit transaction that is secured by a lien (including subordinate liens) on a single-family, owner-occupied residence other than:

1. A home equity line of credit subject to 12 CFR 1026.40 and 12 CFR 1026.43(h);
2. A reverse mortgage subject to 12 CFR § 1026.33;
3. A temporary or “bridge” loan with a term of 12 months or less, such as a loan to finance the purchase of a new dwelling where the consumer plans to sell a current dwelling within 12 months or a loan to finance the initial construction of a dwelling;
4. A construction phase of 12 months or less of a construction-to-permanent loan;
5. An extension of credit made pursuant to a program administered by a Housing Finance Agency, as defined under 24 CFR § 266.5;
6. An extension of credit made pursuant to a program administered by the U.S. Department of Housing and Urban Development, the U.S. Department of Veterans Affairs, or the U.S. Department of Agriculture;
7. A transaction that does not require payment of interest; or
8. A transaction made for the purpose of foreclosure avoidance or prevention.

Applicants that offer any of the types of mortgages listed among the exceptions (i – viii above) do not need to include those mortgages in their responses to the question PM14.

Note that the covered mortgages included in the scope of the questions in PM14 is different than the covered mortgages included in the scope of PM19 on the consumer product protections of the Applicant’s mortgage loan products. (Cf. Question 29 of this FAQ.) Covered mortgages under PM14 include transactions secured by a subordinate lien, as well as transactions with a payment schedule that is adjusted to the seasonal or irregular income of the consumer, both of which are excepted under PM19.