CFPB Loosens Qualified Mortgage Rules to Expand Access

Even the Consumer Financial Protection Bureau believes its standards for what qualifies as a Qualified Mortgage are too strict, proposing on Wednesday some “minor adjustments” to mortgage rules many in the industry have called restrictive. 

The CFPB is proposing two changes meant to help certain nonprofit organizations continue to provide mortgage credit and servicing to underserved populations.

Additionally, the proposal outlines “limited circumstances” where lenders that exceed the points and fees cap can refund the excess amount to consumers, with the loan still considered a Qualified Mortgage.

“Our mortgage rules are now helping to protect consumers all across the country from debt traps, runarounds, and surprises,” said CFPB Director Richard Cordray in a statement. “Today’s proposal would maintain those strong protections, while making minor changes to ensure consumers have access to credit. This includes helping nonprofits that provide working families with important pathways to affordable homeownership.”

Among the three proposed changes is an alternate definition of small nonprofit servicers with unique structures, and tailoring an amendment to allow certain nonprofit groups like Habitat for Humanity to continue to extend certain interest-free, forgivable loans without regard to the Ability-to-Repay rule’s 200-mortgage limit. 

The CFPB is also proposing a change “designed to encourage lenders to provide access to credit to consumers seeking loans that are at or near the points and fees limit.” 

“This proposal is a positive development for consumers because it would allow lenders to extend safe, sustainable Qualified Mortgage (QM) loans to considerably more qualified borrowers,” said David Stevens, president and CEO of the Mortgage Bankers Association, in a statement. “MBA looks forward to commenting on this proposal and working with the CFPB to ensure that these proposals work to benefit consumers to the greatest extent possible.”

Once the proposal is published in the Federal Register it will be open to public comment, and the CFPB is also seeking input on other questions related to the impact of its mortgage rules, including their effect on large lenders that don’t meet the definition of a small creditor.

Other issues may be addressed in future rulemakings, the CFPB said, as the bureau attempts to make sure its mortgage rules provide consumers with protections while maintaining access to affordable credit. 

Access the proposed rule.

Written by Alyssa Gerace

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