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CFPB issues rules on repaying provisions and HOEPA

Credit unions will be interested in two final rules from the Consumer Financial Protection Bureau (CFPB). One of the rules is on the ability to repay provisions under the Dodd-Frank Act. CUNA put together an initial summary, which can be found here and a CFPB press release which includes additional information, which can be found here. The CFPB also posted final rules to its website for HOEPA/“High Cost” mortgages and mortgage escrows, which are mandated by the Dodd-Frank Act. You will get more information on these two rules next week.

CUNA continues to look at all of the proposed rules and feel many are addressing some of the issues CUNA has raised to the bureau, including the safe harbor for compliance challenges when  prime residential mortgage loans meet the rule’s “qualified mortgage” standards. The agency has also included standards for legal protections for lenders when the mortgage loan is subprime. The rules call for prime and subprime lenders to consider economic factors regarding the borrower that are outlined in our summary.  It also includes requirements for a loan to be a qualified mortgage, such as a prohibition on no-doc loans; no negative amortization, interest-only, balloon payments or terms beyond 30 years; and point and fees cannot generally exceed three percent of the total loan amount.  A QM must also meet underwriting criteria including a total debt-to-income ratio of no more than 43%. Certain balloon payment loans could be QMs if they are originated and held in portfolio by small creditors (assets under $2 billion) in rural or underserved areas; also these loans would not be subject to the 43% DTI requirements.