Jan. 16, 2013 – The provisions of the CFPB’s final mortgage rule on borrowers’ ability to repay are detailed in a NAFCU Final Regulation posted online Tuesday.
The final rule, set to take effect Jan. 10 of next year, requires mortgage lenders to consider a mortgage loan applicant’s ability to repay the loan. Loans that meet the rule’s definition of “qualified mortgage” are considered to be in compliance and thus more likely to hold up to legal challenges. However loans that fall outside that definition may be permissible as well.
“Just because a loan isn’t a ‘qualified mortgage’ doesn’t mean the credit union isn’t allowed to issue it,” said Tessema Tefferi, NAFCU’s senior regulatory affairs counsel.
The ability-to-repay rule requires that credit unions consider, at a minimum:
- current or reasonably expected income or assets;
- current employment status;
- monthly payment on the mortgage;
- monthly payment on any simultaneous mortgage;
- monthly payment for mortgage-related obligations;
- current debt obligations, alimony and child support;
- monthly debt-to-income ratio, or residual income; and
- credit history.
A qualified mortgage is one for which points and fees do not exceed 3 percent of the total loan amount. The final rule defines what is included in the definition of “points and fees” – this generally includes everything in the finance charge except interest or the time-price differential. It also defines “total loan amount.”
For details, see NAFCU Final Regulation 13-EF-01 (login required).
NAFCU is preparing a separate Regulatory Alert on the CFPB’s proposed revisions to the final rule as well; comments are due to the CFPB Feb. 25.