The Consumer Financial Protection Bureau (“CFPB”) recently issued a Small Entity Compliance Guide on the Ability-to-Repay and Qualified Mortgage Rule (the “Rule”). The Rule was issued under Dodd-Frank. The Guide provides an overall summary of the Rule and discusses application of the Rule in a Q&A format. The CFPB issued the final rule on January 10, 2013, with an effective date of January 10, 2014.
Entries in Truth in Lending (5)
The OCC, Federal Reserve, CFPB, FDIC, FHFA, and NCUA recently issued notice of a Final Rule establishing new appraisal requirements for “higher-priced mortgage loans” (HPMLs). The Final Rule is being implemented under the Federal Truth in Lending Act and was required under Dodd-Frank. We discussed an earlier proposed version of the rule last November. Whether a consumer mortgage loan is an HPML generally depends on if the interest rate exceeds 1.5% or 2.5% over prime (depending on principal amount) for a first-lien residential mortgage, or 3.5% over prime for a subordinate-lien residential mortgages. There are a number of significant exclusions from requirements under the Final Rule, for example, for property located in “rural counties” and for property acquired from servicemembers.
CFPB Issues Final Rules Governing MLO Compensation Restrictions and Other Requirements under Regulation Z
The Consumer Financial Protection Bureau (“CFPB”) recently issued a final rule (the “Final Rule”) implementing restrictions on mortgage loan originator (“MLO”) compensation under Regulation Z (Truth in Lending), along with additional interpretive guidance. These restrictions, which prohibit MLO compensation based on mortgage loan terms, or “proxies” for such terms, were mandated under the Dodd-Frank Act. In a number of prior blogs, we discussed the CFPB’s evolving guidance on these restrictions. One issue of particular interest was whether profit-based retirement and bonus plans would be prohibited under the rationale that profit serves as a “proxy” for certain loan terms such as interest rate (a view taken by Federal Reserve staff members when the rule was first introduced).
The OCC, Federal Reserve, CFPB, FDIC, FHFA, and NCUA recently issued a joint notice of a proposed rule implementing new appraisal requirements for “higher-risk mortgages.” These requirements would apply under the Federal Truth in Lending Act and were imposed by Dodd-Frank. “Higher-risk” mortgages are defined to include first-lien residential mortgages that exceed an interest rate threshold of 1.5% or 2.5% greater than the average prime offer rate for a comparable transaction (depending on principal amount), and subordinate-lien residential mortgages with an interest rate in excess of 3.5% of the average prime offer rate. There are a number of exclusions from the definition of “higher-risk mortgage” in the proposed rule.
Regulation Z-2 is now officially repealed in Maine. On December 1, 2011, the Maine Bureau of Consumer Credit Protection and Bureau of Financial Institutions jointly announced the conclusion of their rulemaking regarding Regulation Z-2, which was slated for repeal based on recent amendments to Maine’s Consumer Credit Code earlier this year.