CFPB Clarifies Mortgage Rules for Originators, Ability-to-Repay

Friday, the Consumer Financial Protection Bureau (CFPB) finalized amendment and clarifications to its January 2013 mortgage rules in an effort to help the industry comply and better protect consumers. 

The CFPB finalized several mortgage rules in January 2013, among these, the Ability-to-Repay rule that requires lenders to make a “reasonable, good-faith determination” that prospective borrowers have the ability to repay their loans. 

On June 24, 2013, the CFPB proposed several amendments and clarifications to the mortgage rules adopted in Friday’s final rule, which is intended to clarify interpretive issues and facilitate compliance. 

One of the Bureau’s modifications is to clarify what servicer actives are prohibited in the first 120 days of delinquency. This rule prohibits servicers from making the “first notice or filing” under state law during the first 120 days a borrower is delinquent.

Under the rule, servicers will be allowed to send certain early delinquency notices required under state law to borrowers that may provide beneficial information about legal aid, counseling or other resources.

Another rule the CFPB aims to clarify is the definition of a loan originator.

Under the CFPB’s new rules, persons classified as loan originators are required to meet qualification requirements and are also subject to certain restrictions on compensation practices. 

Need for a definition clarification arose as creditors and loan originators have expressed concern that tellers or other administrative staff could be unintentionally classified as loan originators for engaging in routine customer service activities.

The agency also touched on clarifying the points and fees thresholds and loan originator compensation rules for manufactured housing employees. 

For retailers of manufactured homes and their employees, the revisions clarify what compensation must be counted toward certain thresholds for points and fees under the Ability-to-Repay and high-cost mortgage rules. The revisions also clarify when employees of manufactured housing retailers may be considered as loan originators.

Prior to Friday’s changes, the provisions of the CFPB’s loan originator compensation rules that have not yet gone into effect were scheduled to take effect on January 10, 2014.

CFPB has changed the effective date for certain provisions of the rule to January 1, 2014, in order to simplify compliance since compensation plans, training and licensing and registration are often structured on an annual basis.

“Our mortgage rules were designed to eliminate irresponsible practices and foster a thriving, more sustainable marketplace,” said CFPB Director Richard Cordray. “Today’s rule amends and clarifies parts of our mortgage rules to ensure a smoother implementation process, which is helpful to both businesses and consumers.”

Written by Jason Oliva

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