Consumer Finance Insights
October 27, 2014

CFPB Finalizes Mortgage Rules Amendments

On October 22, the CFPB issued amendments to the Dodd-Frank Act mortgage rules that took effect in January 2014.  The amendments include:

ATR/QM Cure Provision: Under the Ability-to-Repay/Qualified Mortgage Rule, a mortgage loan must meet certain requirements to be considered a “qualified mortgage”.  One such requirement is that the points and fees charged to a consumer usually cannot exceed 3 percent of the loan amount.  The latest amendments now permit a lender or loan purchaser to cure defects in compliance with this requirement.  If the lender discovers, after the loan has closed, that the 3 percent cap was exceeded, the loan may still retain QM status if the lender refunds the excess amount to the consumer with interest – so long as the refund occurs within 210 days after consummation and before the consumer defaults, provides written notice of the defect, or files suit. This provision will expire on January 10, 2021.

ATR Exemption for NonProfit Entities:  501(c)(3) nonprofit organizations that lend to low- and moderate-income consumers are already exempt from the Ability-to-Repay rule if such organizations make no more than 200 mortgages a year and comply with other limits.  The amendments change this provision to allow certain non-profit groups to extend certain interest-free loans without regard to the 200-mortgage loan limit.

Servicing Exemptions for Small Servicers: Certain small servicers are exempt from some of the CFPB’s new mortgage servicing rules, so long as they (and their affiliates) service 5,000 or fewer mortgage loans and are the creditor or assignee for those loans.  Some non-profit organizations did not meet this exemption because they service loans from other associated non-profit lenders that are not considered “affiliates,” even though they serve the same charitable mission and use a common name, trademark, or servicemark.  The amendments expand the small servicer exemption to include these non-profit organizations, so long as they are 501(c)(3) non-profits that service loans on behalf of other non-profits within a common network or group of nonprofit entities, and otherwise comply with applicable rules.

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