- CFPB Finalizes Amendments to Mortgage Rules
- November 28, 2014 | Authors: Peter L. Cockrell; Brett M. Kitt; J. Scott Sheehan
- Law Firms: Greenberg Traurig, LLP - McLean Office ; Greenberg Traurig, LLP - Washington Office ; Greenberg Traurig, LLP - McLean Office ; Greenberg Traurig, LLP - Houston Office
On October 23rd, the CFPB issued a final rule amending three provisions of the CFPB’s 2013 mortgage rules.
First, the amendment provides a limited, post-consummation cure mechanism for loans that exceed the points and fees limit acceptable for qualified mortgages (QM). Generally, to qualify as a QM, a mortgage loan must not have points and fees that exceed 3 percent of the loan amount. Where a lender originates a purported QM and discovers after consummation that points and fees actually exceed the 3 percent limit, the cure provision will permit the lender to refund the overage amount of points and fees, plus interest, to the borrower within 210 days of consummation as a means of maintaining the loan’s QM status. The lender must also cure the overage prior to the occurrence of any of the following: (1) the consumer files an action regarding the loan; (2) the creditor receives written notice from the consumer regarding the overage; or (3) the consumer becomes 60 days past due. The final rule also requires lenders to maintain and follow policies and procedures for implementing this cure procedure. The cure provision will sunset on January 10, 2021.
Second, the amendment provides an alternative definition of the term “small servicer” applicable to certain nonprofit entities that service loans on behalf of other nonprofit chapters of the same organization. “Small servicers” are exempt from certain provisions of the CFPB’s mortgage servicing rules if they service 5,000 or fewer mortgage loans annually and satisfy other requirements. To address concerns that some nonprofits might not be able to qualify for the exemption because of the number of loans they service, the rule provides an alternative definition. The final rule expands the definition of a small servicer to include “a nonprofit entity that services 5,000 or fewer mortgage loans, including any mortgage loans serviced on behalf of associated nonprofit entities, for all of which the servicer or an associated nonprofit entity is the creditor.”
Third, the amendment provides that certain non-interest bearing, contingent subordinate lien loans that are originated by nonprofit lenders will not be counted towards the credit extension limit that applies to the nonprofit lender exemption from the ”ability-to-repay” requirements.
The CFPB declined in the final rule to address a cure for QM loans that inadvertently exceed the 43 percent debt-to-income ratio required under the ATR rule.
The rule took effect upon publication in the Federal Register on November 3, 2014.