CFPB Proposes More Mortgage Rule Tweaks

ThernConsumer Financial Protection Bureau (CFPB) is again proposing a few minorrnmodifications to its new mortgage rules, suggesting changes designed torneliminate hurdles some nonprofit organizations might encounter in providingrnaccess to credit and servicing and slightly easing one regulation regarding high-priced mortgages .  </p

The Bureaurnissued proposed amendments late Wednesday and each seems to address limitedrninstances of unintended consequences arising from the larger rules.  One proposed amendment would apply to somernsmall servicers which, while exempt from new mortgage servicing rules becausernthey service 5,000 or fewer loans, also service loans for a fee from associatedrnnonprofit housing providers and may not be able to restructure their overall activitiesrnto meet the small servicer exemption. rnThe new proposal offers an alternative definition of small servicersrnwhich would apply to certain 501(c) (3) nonprofitrnorganizations and will allow them to consolidate servicing activities andrnmaintain their current exemption from some servicing rules.  </p

A secondrnproposed change would apply to an existing exemption from the Ability-to-Repayrnrule for organizations that make fewer than 200 mortgages a year.  The change would apply only to certain 501(c)rn(3) nonprofits groups such as Habitat for Humanity and would allow them tornextend certain interest-free, forgivable loans or “soft seconds” without regardrnto the 200-loan limit</p

Under the Ability-to-Repay rule arnconsumer cannot be charged points and fees on a Qualified Mortgage that exceedsrn3 percent of the loan principal.  If arnlender finds it has mistakenly charged in excess of that amount a thirdrnproposed change lays out limited circumstances where the excess can be refundedrnto the consumer and still allow the loan meet the legal requirements of arnQualified Mortgage.  The change specifiesrnthat the refund must occur within 120 days after the loan is made and thernlender must maintain and follow policies and procedures for reviewing the loansrnand providing refunds to consumers. CFPB said the change is designed tornencourage lenders to provide access to credit to consumers seeking loans thatrnare at or near the points and fees limit.</p

“Our mortgage rules are now helping to protectrnconsumers all across the country from debt traps, runarounds, and surprises,”rnsaid CFPB Director Richard Cordray. “Today’s proposal would maintain thosernstrong protections, while making minor changes to ensure consumers have accessrnto credit. This includes helping nonprofits that provide working families withrnimportant pathways to affordable homeownership.”</p

CFPB is seeking public comment onrnthe changes which can be review in their entirety here.   It is also seeking input on other questionsrnrelating to the impact of the Bureau’s rules, including their effect on largerrnlenders that do not meet the definition of small creditor. </p

One stakeholder immediately expressedrnsatisfaction with the change allowing refunds of excess fees.  David H. Stevens, Presidentrnand CEO of the Mortgage Bankers Association (MBA) called them a positiverndevelopment for consumers which would expand access to safe, sustainable QualifiedrnMortgages.  “Asrnis being considered,” he said, “if a lender believes it has offered a QM loanrnbut later discovers the points and fees exceeded 3 percent of the loan amount, thernexcess could be refunded to the borrower and the loan could still meet QMrnrequirements. MBA looks forward to commenting on this proposal and working withrnthe CFPB to ensure that these proposals work to benefit consumers to therngreatest extent possible.”

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