CFPB Clarifies Ability-to-Repay Mortgage Rule

Today, the Consumer Financial Protection Bureau (CFBP) issued several clarifications to its mortgage servicing rules. 

The proposal concerns CFPB’s Ability-to-Repay rule, among other clarifications the bureau makes clear. 

The Ability-to-Repay rule specifies that a consumer’s debt-to-income (DTI) ratio show that the consumer’s monthly debt payments, including the mortgage, will not be more than 43% of the consumer’s monthly income.

The proposal provides clearer rules for determining a consumer’s DTI, amending language relating to a consumer’s employment record and income.

Specifically, the updated rule states that the “probability of continued employment” will not function properly as a regulatory requirement, because employers will likely be unwilling to provide any confirmation of employment continuing beyond current, ongoing employment. 

Without the benefit of waiver, such a requirement could disqualify any consumer’s employment income from being included in the DTI calculation, which would then frustrate access to credit, writes CFPB. 

For these reasons, CFPB proposes to amend appendix Q of its rule, which requires creditors to determine a consumer’s past and present employment.

Additionally, CFPB is also proposing to remove the requirement that creditors obtain “the employer’s confirmation of continued employment,” and instead require only that the credit examine a confirmation of current, ongoing employment. 

The CFPB is also adding, for clarification purposes, a proposed note that states creditors may assume employment is ongoing if a consumer’s employer verifies current employment and does not indicate that employment has been, or is set to be terminated. 

With this proposal, CFPB aims to make clear that credits should not rely upon a verification of current employment that includes an affirmative statement that the employment is likely to cease. 

Other areas of clarification include contract variances and the temporary QM provision; purchase, guarantee or insurability status and the temporary QM; no field preemption under Regulation X; and small servicer exemption. 

Read the proposed rule.

Written by Jason Oliva

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