HPML status can only apply to a loan secured by a primary residence. And no, the 3.5% is only for QM status if you are a small creditor. In other words if you are a small creditor under the QM rules you can obtain a “Conclusive” Safe Harbor for Small Creditor Portfolio and Balloon Payment QM first lien HPML’s where the Annual Percentage Rate (APR)/Average Prime Offer Rate (APOR) spread is less than 3.5%. The loan secured by a 1st lien primary residence is still an HPML at 1.5%.

So...and I'm just so sorry for being complete dense to this issue again...but what does this stmt below "mean" for small creditors again??? That we don't have to "escrow"...that we don't have to have "assets"...that we don't have to comply with the 43% DTI?? If nothing changes about HPML regardless if you are a small creditor or not...sorry as usual I just don't get it...


However earlier this year, the CFPB announced an amendment to Regulation Z that created a new category of qualified mortgages. Any creditor that…
1.Had total assets less than $2 billion AND
2.Extended less than 500 first-lien mortgages last year[/b]

…can be considered a small creditor. The threshold for small creditors has been increased from 1.5 to 3.5 percentage points. Therefore, using the same assumption of a 4.25% APOR, a small creditor could originate a first-lien mortgage up to 7.75% (APOR + 3.5%) and still avoid the HPML label.

Unless it's a jumbo, if the rate's at APOR + 1.5%, it's an HPML. You must escrow unless you satisfy each part of the four-part test.

I think the author of that ^blue text^ is confusing HPML with Higher-Priced Covered Transaction (HPCT). My shop does things as simply as a small-creditor-QM originator can, so my memory may not be serving me well here, but I think you lose the ATR safe harbor on a HPCT.

The escrow requirement applies to first lien loans - I have a second lien where there is no existing escrow requirement on the first.

Since the rule applies only (?) to first lien loans, need I establish an escrow account on the subordinate lien even though no escrow account currently exists?

No. As you stated the escrow requirement only applies to first lien loans.