United States

CFPB proposes amendments to mortgage rules


The Consumer Financial Protection Bureau (CFPB) proposed a series of amendments to its 2013 Title XIV Final Rules. A summary of the three amendments, which are primarily focused on Regulation Z's Ability-to-Repay, Qualified Mortgage and servicing requirements, is as follows:

Cure mechanism for points and fees overages. The CFPB proposed a limited, post-consummation cure mechanism for loans that are originated with the good faith expectation of a "qualified mortgage" status, but end up exceeding the 3 percent limit on points and fees. In this case, the proposed amendment would allow the lender to refund excess fees to the borrower within 120 days, while maintaining the legal protections of a qualified mortgage. Additionally, the Bureau sought comment on "whether and how" to cure or correct loans that were originated in good faith as qualified mortgages, but ultimately exceeded the 43 percent debt-to-income limit.

Definition of small servicers. In this area, the Bureau's amendment would add an alternative definition of "small servicer" that would apply to certain nonprofit entities that service for a fee loans on behalf of other nonprofit chapters of the same organization. The small servicer designation, which would exempt the provider from certain mortgage servicing provisions, would apply if the nonprofit organization services 5,000 or fewer mortgage loans, including those operating under a common name, trademark or service mark. Generally, under the definition, a servicer cannot be a small servicer if it services any loan for which the servicer or its affiliate is not the creditor or assignee. The proposal contains a comment providing an example of how the new small servicer definition applies to nonprofit entities.  The comment states:

A nonprofit entity services 5,400 mortgage loans. Of these mortgage loans, it originated 2,800 mortgage loans and associated nonprofit entities originated 2,000 mortgage loans. The nonprofit entity receives compensation for servicing the loans originated by associated nonprofits. The nonprofit entity also voluntarily services 600 mortgage loans that were originated by an entity that is not an associated nonprofit entity, and receives no compensation or fees for servicing these loans. The voluntarily serviced mortgage loans are not considered in determining whether the servicer qualifies as a small servicer. Thus, because only the 4,800 mortgage loans originated by the nonprofit entity or associated nonprofit entities are considered in determining whether the servicer qualifies as a small servicer, the servicer qualifies for the small servicer exemption pursuant to section 1026.41(e)(4)(ii)(C) with regard to all 5,400 mortgage loans it services.

Minimum standards for transactions secured by a dwelling. The Bureau proposed a modification of the nonprofit small creditor exemption in Regulation Z's Ability-to-Repay rule. To qualify for this exemption, a lender must have no more than 200 credit transactions secured by a dwelling during the calendar year preceding a consumer's mortgage application. The proposal would exclude certain deferred, contingent or interest-free subordinate liens from this annual credit extension limit.

Read more information on the proposed amendments

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Kelly Housh
Regulatory Compliance National Support
Minneapolis, MN

Ty Beasley
Regulatory Compliance National Leader
Dallas, TX