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Issues linger with CFPB ability-to-repay

Small community banks and credit unions have continuously voiced their concerns to the Consumer Financial Protection Bureau regarding the impending Ability-to-Repay rule.

"The Bureau had to make a number of difficult calls very early in its existence, so it is not surprising that there are still lingering issues," Benjamin Olson, counsel who joined the financial services law firm BuckleySandler, said.

Finally on Wednesday, the CFPB released the finalized amendments to create exceptions for small creditors, community development lenders and housing stabilization programs.

"There were a number of things being addressed in this latest rule, but there were two that were of the biggest concern," Olson said.

First was the treatment of loan origination compensation as points and fees, and secondly, the issues that arise with defining a rural area for small lenders.

"While obviously there is more we would have liked to have seen done, particularly around the points and fees calculation, I think today’s announcement shows that the bureau is trying to appropriately balance consumer protection with access to affordable credit for qualified borrowers," David Stevens, President and CEO of the Mortgage Bankers Association, said. 

The bureau prevented some double counting and avoids the difficulty involved in determining the amount of compensation paid to individual loan officers and mortgage brokers by their employers, Olson explained.

However, Olson added, "The Amendments do not prevent the double counting that may occur when both payments from the consumer to the creditor and payments from the creditor to the mortgage broker are included in points and fees."

Additionally, the new amendment addressed the rural and undeserved areas.

In order to define rural, the CFPB looked to the Census Bureau’s and the Home Mortgage Disclosure Act, but the decided definition was still unsatisfying for some smaller lenders.

In result, the added safeguards will take effect with the ATR rule on Jan. 10, 2014.

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