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CFPB / RegulatoryMortgage

CFPB finalizes Ability-To-Repay amendments

An exception for certain small lenders who want to extend loans with debt-to-income ratios above the 43% qualified-mortgage threshold is just one part of the Consumer Financial Protection Bureau’s finalized Ability-to-Repay Rule (ATR) amendments.

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

“Our Ability-to-Repay rule was crafted to promote responsible lending practices,” said CFPB Director Richard Cordray. “Today’s amendments embody our efforts to make reasonable changes to the rule in order to foster access to responsible credit for consumers.”

The bureau amended three distinct parts of the Ability-to-Repay rule. First, it created exemptions for certain nonprofit creditors. The amendments also attempt to facilitate lending among qualified small creditors while establishing a baseline for calculating loan origination compensation.

“The final rule exempts from Ability-to-Repay rules certain nonprofit and community-based lenders that work to help low- and moderate-income consumers obtain affordable housing,” the CFPB said.

In addition, the CFPB said they will facilitate smaller lending by conquering two hurdles. One of those is extending qualified mortgage status to certain loans when smaller creditors hold them in portfolio even if the homeowner’s debt-to-income ratio exceeds 43%. The amendments also provide a two-year transition period in which small lenders meeting certain conditions can make balloon loans without falling outside the parameters of QM status.

A revamped rule regulating loan origination compensation ensures lenders offering qualified mortgages do not charge excessive points and fees.

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

Meanwhile, the CFPB separately issued a rule delaying the effective date of a regulation that prohibits creditors from financing credit insurance premiums in connection with certain mortgage loans. 

The provision was supposed to take effect on June 1, 2013, but has been suspended indefinitely while the CFPB collects and reviews comments on the issue.

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