Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z)
The CFPB (Consumer Finance Protection Bureau) amended Regulation Z and released their revised rules at 4:30 pm ET today (Jan 10, 2013) regarding the Ability to Repay and Qualified Mortgage Standards. The final rule implements sections 1411 and 1412 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.” There are also provisions regarding pre-payment penalties, which are severely restricted due to section 1414 of the Dodd-Frank Act.
The EFFECTIVE date is January 10, 2014, which does allow lenders some time to wade through the 800+ pages of the document, so they can best determine what they will have to do to meet these revised regulations, and get their people trained and any software changes brought into conformity.
At the same time, CFPB issued a concurrant proposal, and part of that shows that The Bureau is seeking feedback on whether additional clarification is needed regarding the inclusion of loan originator compensation in the points and fees calculation. More on this one later, as I want to peruse the 185 pages before I write on it.