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WASHINGTON — The Consumer Financial Protection Bureau has made some key changes to its compliance guide for the three major mortgage rules that took effect earlier this year.
The amendments posted Monday address two areas of concern that have been raised by lenders and policymakers. One expands an exemption so certain nonprofit lenders do not have to meet all of the ability-to-repay requirements, (so long as it meets three other requirements). The second major change gives a so-called “cure mechanism” for lenders who belatedly find out that the loan they wrote as a Qualified Mortgage exceeds the points-and-fees cap required under the QM rule.
The CFPB said in an email notice that the changes “will help certain nonprofit organizations continue to provide mortgage credit and servicing to underserved populations.”
Leaders of nonprofits, including from Habitat for Humanity, have raised concerns to lawmakers and the CFPB about needing exemptions from the ability-to-repay requirements in order to offer credit to low-income families. The agency has already finalized these tweaks into the rulemaking and then updated its “small entity compliance guide” for the ability-to-repay, QM and mortgage servicing rules on Monday.
Under the CFPB’s mortgage rules, lenders are required to verify the borrower’s ability-to-repay unless they met certain exemptions. The updated guide includes an exemption for certain 501(c)(3) nonprofit organizations that extend credit less than 200 times annually, provide it to low-to-moderate income borrowers and have their own internal policy on checking for an ability-to-repay, according to the updated guidance. Some interest-free, forgivable loans do not have to meet the 200-loan limit in order to be exempted from the rule.
The second major change to the guidance has to do with a concern lenders raised about underwriting a Qualified Mortgage and then later finding out it exceeded the points-and-fees cap. The guidance says if the lender finds out that they exceeded that cap after the loan closed, there are “limited” cases where the loan can be cured to remain as a QM loan. Lenders must meet certain steps that CFPB outlines within 210 days after the loan is consummated, along with a list of maintenance and procedural requirements.
These changes “lay out limited circumstances where lenders that exceed the points and fees cap can pay a refund of the excess amount plus interest to consumers and still have the loan be considered a Qualified Mortgage,” the CFPB said in the email.