Jan. 11, 2013 – The CFPB on Thursday published its final ability-to-repay mortgage rule as well as a set of proposed amendments that, among other things, defines what is a “qualified mortgage” specifically for small credit unions and community banks.
The final rule takes effect next Jan. 10. Under the rule, a qualified mortgage generally would be given a safe harbor or rebuttable presumption of compliance with the requirement that the loan fits the borrower’s ability to repay. The safe harbor would apply generally to lower priced loans to consumers with good credit history; more costly loans to less-creditworthy borrowers would have the rebuttable presumption.
The rule requires lenders to consider eight specific underwriting factors in order to meet the QM standard; one of these includes a debt-to-income ratio for the borrower no higher than 43 percent.
NAFCU President and CEO Fred Becker said the association welcomes the CFPB’s provision of a QM safe harbor. However, he reiterated the association’s concerns that a rigid approach to rulemaking will only hinder credit unions’ ability to provide loans.
The bureau says a loan does not meet the QM standard if it involves negative amortization, interest-only payments, balloon payments or terms exceeding 30 years. So-called “no-doc” loans and loans for which points and fees paid by the consumer exceed 3 percent of the loan amount also are not within the QM standard. (Certain “bona fide discount points” are excluded for prime loans, the CFPB says.)
The final rule is set to take effect next January. NAFCU is preparing Final Regulation.
In Thursday’s action, the CFPB also issued final rules on mortgage escrow accounts and limits and triggers under the Home Ownership and Equity Protection Act. The escrow account final rule takes effect this June 1. The HOEPA final rule kicks in Jan. 10, 2014.