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Since the qualified mortgage rules went into effect, one of the more interesting interpretations is that loan brokers are able to utilize an affiliate title company without impacting the 3% cap on points and fees. The rationale is that the QM rules provide generally that monies paid directly or indirectly to a creditor, originator or an affiliate of either must be counted toward the 3% cap in points in fees. However, a more specific provision states that real estate-related fees, otherwise excluded, are included if they are paid to a creditor or an affiliate of a creditor. Many believe that because originators are not mentioned in regard to the re-inclusion of real estate related fees (which include charges for title insurance) it permits brokers to maintain an affiliate title relationship without impacting the QM cap on points and fees.

While a technical reading of the language does support this interpretation, it would not be wise to risk the QM status of loans in the absence of a specific interpretation by the Consumer Financial Protection Bureau. Indeed, uniformly, brokers have not been given preferential treatment (to say the least) when it comes to regulations. It would thus be surprising—and wholly inconsistent with the expressed rationale for including payments to an affiliate in calculating points and fees–to permit brokers to maintain these relationships without impacting the cap on points and fees, while prohibiting creditors from doing so. In fact, I can think of no reason for such a distinction, and the CFPB's authority is certainly broad enough to interpret the QM rules as requiring that all affiliate title relationships impact the 3% cap on points and fees.

From a practical standpoint, of course, the creditor takes all of the risk if it omits broker affiliated title fees from the QM calculation. Moreover, it receives none of the benefit (if indirectly it received any benefit the charges would plainly be included in the cap). Absent CFPB clarification confirming a distinction exists in the treatment of broker and creditor affiliated title companies, the best bet is to assume such a pointless distinction was not intended and act accordingly.

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