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CFPB Opens Proposed Mortgage Rule Changes for Public Comment
The Consumer Financial ProtectionrnBureau (CFPB) has issued another set of proposed clarifications andrnrevisions to the mortgage rules it released in January. The Bureaurnsaid it hoped the changes would resolve questions that have arisenrnduring the initial implementation of the rules and “help the rulesrndeliver their intended value for consumers.”</p
The changes involve three sets ofrnrules;</p<ul<li
The Ability-to-Repay rule whichrnsets out requirements for lenders to make a reasonable, good-faithrndetermination that prospective borrowers can repay the loans forrnwhich they are applying; </p</li<li
Mortgage servicing rules whichrnestablish protections for homeowners facing foreclosure;</p</li<li
Loan originator compensation rules</bthat prohibit some of the activities that encouraged originators tornsteer borrowers toward risky or high-priced loans.</p</li</ul
CFPB is inviting public comment on thernfollowing proposed changes until July 22. </p
The CFPB servicing rules mandate a five-day deadline tornacknowledge receipt of a loss mitigation application and note whetherrnor not that application is complete. The proposal clarifies thatrnservicers are required to seek the additional information from thernborrower if they cannot complete the assessment without it andrnrequires that servicers ensure that borrowers do not lose certainrnprotections under the rule until the borrower has had a reasonablerntime to remedy the application’s deficiencies.</p
Another proposed change would make it easier for servicers tornoffer short-term forbearance plans for delinquent borrowers who needrnonly temporary relief. This would avoid the need for a fullrnloss-mitigation evaluation process. </p
Some Ability-to-Repay prohibitions contain exceptions for smallrncreditors that operate primarily in “rural” or “underserved”rnareas. CFPB previously announced it would reexamine the definitionsrnof those two terms over the next two years but is now proposing tornclarify how creditors might proceed while that reexamination isrnunderway. The Bureau proposes to extend an exemption to a ban onrnhigh-cost mortgages with balloon payments and would revise anrnexemption from a requirement to maintain escrows on certain higherrnpriced mortgages to small creditors that do not operate primarily inrnrural or underserved areas as long as the loans meet certainrnrestrictions and criteria. .The proposal would extend availabilityrnto small creditors that qualified as such in any of the previousrnthree calendar years.</p
A number of questions have arisen about the Dodd-Frank Act<bprohibition of creditors financing of credit insurance premiums. Thernproposal would clarify what constitutes financing of credit insurancernpremiums by a creditor – particularly as the rule applies torn”level” or “levelized” premiums, where the monthly premium isrnthe same each month rather than decreasing along with the loanrnbalance. It would also provide guidance on when credit insurancernpremiums are considered to be calculated and paid on a monthly basisrnfor purposes of an exclusion from the statutory prohibition.</p
Under the CFPB’s new rules, persons classified as loanrnoriginators are required to meet qualification requirements, and arernsubject to certain restrictions on compensation practices. Today’srnproposal would clarify the circumstances under which a loanrnoriginator’s or creditor’s administrative staff acts as loanrnoriginators. </p
For retailers of manufactured homes and their employees, thernproposal would clarify what compensation must be counted towardrncertain thresholds for points and fees under the ability-to-repay andrnhigh-cost mortgage rules. </p
CFPB is also seeking comment on whether the effective date ofrnportions of the loan originator rule and the ban on financing ofrncredit insurance should be changed slightly from their currentrneffective dates of January 14, 2010. </p
“When we published our mortgage rules, we pledged to bernattentive to issues that arose through the implementation process,”rnsaid CFPB Director Richard Cordray. “Today’s proposal revises andrnclarifies certain aspects of our rules to ease implementation and tornpave the way for more effective consumer protections in thernmarketplace.”</p
The Bureau recently published a new Regulatory Implementation webrnpage, which consolidates all of the new 2013 mortgage rules andrnrelated implementation materials, and can be found here:rnhttp://www.consumerfinance.gov/regulatory-implementation
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About the Author
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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