PROPOSED TIL CHANGES – GOOD NEWS?

On April 30 the Consumer Financial Protection Bureau (CFPB) proposed changes to Regulation Z rules related to the small servicer exemption and to the qualified mortgage rules. The proposal is on a fast track, with a 30-day comment period.

Small Servicer

The proposed changes to the small servicer rules are nice. The CFPB proposes an alternative small servicer definition for nonprofit entities that meet certain requirements, and amend the existing exemption from the ability-to-repay rule for nonprofit entities that meet certain requirements. We all like non-profits, so it’s great that the CFPB wants to make their lives better.

QM Correction

In order for a loan to be considered as a Qualified Mortgage under Sections 1026.43(e)(2), (e)(4), (e)(5), (e)(6)or (f), the total of points and fees cannot exceed a cap that ranges from 3% to 8% of the total loan amount. The proposal creates an exception to the fee cap if the creditor or assignee determines after consummation that the total points and fees payable in connection with a loan exceed the applicable limit under paragraph (e)(3)(i), provided:

(A)  The creditor originated the loan in good faith as a qualified mortgage and the loan otherwise meets the requirements of paragraphs (e)(2), (e)(4), (e)(5), (e)(6), or (f) of this section, as applicable;

(B)  Within 120 days after consummation, the creditor or assignee refunds to the consumer the dollar amount by which the transaction’s points and fees exceeded the applicable limit under paragraph (e)(3)(i) of this section at consummation; and

(C)  The creditor or assignee, as applicable, maintains and follows policies and procedures for post-consummation review of loans and refunding to consumers amounts that exceed the applicable limit under paragraph (e)(3)(i).

The following may serve as evidence that a creditor originated a loan in good faith as a qualified mortgage:

(A)  A creditor maintains and follows policies and procedures designed to ensure that points and fees are correctly calculated and do not exceed the applicable limit under § 1026.43(e)(3)(i); or

(B)  The pricing for the loan is consistent with pricing on qualified mortgages originated contemporaneously by the same creditor.

The proposed changes for non-profits are good news for non-profits. The Proposed QM correction is potentially good news for all creditors. While not life changing, the QM correction rule will, on occasion, allow a creditor to preserve QM status on a loan when a miscalculation has occurred.

A copy of the 85-page proposal is available by clicking here.

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