MBA CMB cheat sheet

Qualified Mortgage (QM): the general QM uses a price-based threshold (APR exceeding APOR by 2.25 percentage points for first liens, 3.5 for subordinate liens, 6.5 for personal property) plus product-feature limits; loans must meet Appendix Q-style debt-to-income and documentation standards under the legacy/general definitions.

Ability-to-Repay (ATR): eight underwriting factors must be considered - income/assets, employment, monthly payment on the proposed loan, payments on other loans, simultaneous loans, property taxes and insurance, other obligations (alimony, child support), and DTI or residual income.

DTI = total monthly debt obligations ÷ gross monthly qualifying income. Front-end ratio uses housing expense only (PITI + HOA + mortgage insurance); back-end includes all recurring debt.

PITI = principal + interest + property taxes + hazard insurance; add mortgage insurance, flood insurance, HOA dues, and any special assessments for the true housing expense.

LTV = loan amount ÷ lesser of purchase price or appraised value (for purchases) or appraised value (for refinances). CLTV = (first lien + all subordinate liens) ÷ value. HCLTV includes undrawn HELOC limits.

PMI cancellation: borrower-requested cancellation at 80% original value with good payment history; automatic termination at 78% of original value based on the amortization schedule; final termination at 78% of original value on the scheduled date.

Escrow requirements: higher-priced mortgage loans (HPMLs) generally require escrow for at least five years unless an exemption applies; small-creditor and rural exemptions exist.

RESPA/TILA integrated disclosures (TRID): Loan Estimate within 3 business days of application; Closing Disclosure at least 3 business days before consummation. Changed circumstances permit revised disclosures with timing rules.

AUS findings: DU/LPA recommendations of Approve/Eligible reflect credit, capacity, collateral, and capital; a downgrade may require manual underwriting, additional reserves, or compensating factors.

Gain-on-sale accounting: gain = sale proceeds − net carrying value of the loan − direct origination/sale costs; sale proceeds include servicing-retained or servicing-released valuations.

Mortgage servicing rights (MSR) value is driven by servicing fee, expected prepayment speed (CPR), discount rate, escrow float, and delinquency/default costs. Faster prepayments reduce MSR value.

Servicing-released premium is typically expressed as a percentage of unpaid principal balance (UPB); servicing-retained execution adds an MSR asset whose fair value must be modeled and marked.

Pipeline hedging: use TBA (to-be-announced) MBS, Treasury futures, or mandatory/forward commitments to offset fallout and price risk; hedge ratio = hedged UPB ÷ total pipeline UPB, adjusted for pull-through.

Pull-through rate estimates the share of locked pipeline that will fund; it rises with borrower credit quality, longer lock age toward expiration, and less rate incentive to shop.

Warehouse line economics: cost of carry = note rate − warehouse advance rate × funding cost − servicing value; advance rates commonly 95–98% of eligible loan balance for conforming product.

Capital and liquidity: MSRs carry risk-weight and concentration limits; regulators scrutinize interest-rate risk in MSR fair value and the liquidity coverage of warehouse facilities.

Margin management: production margin = (loan sale price + servicing value + fees) − (loan acquisition price + origination cost). Volume, mix, and channel (retail/wholesale/correspondent) drive profitability.

Regulatory strategy: CFPB rules (ATR/QM, TRID), FHFA/Fannie-Freddie eligibility, and state licensing shape product design; executive decisions weigh compliance cost against channel economics.