The Consumer Financial Protection Bureau finalized clarifications to mortgage rules Wednesday, improving consumer protections in qualified mortgages and mortgage servicing.
The corrections, clarifications and amendments were first proposed in April. Of those, the rules focuses on the Ability-to-Repay rule, which protects consumer from irresponsible mortgage lending by requiring lenders to make reasonable determination that prospective borrowers have the ability to repay their loans.
Additionally, the mortgage servicing rules will establish protections for homeowners as they repay their loans, and especially for distressed borrowers facing foreclosure.
"We know that effective implementation helps our rules deliver their intended value to consumers," said CFPB Director Richard Cordray.
He added, "We are listening closely to feedback on our rules, and today’s clarifications show our willingness to make appropriate adjustments to achieve that goal."
The finalization of the current mortgage rules clarifies how to determine a consumer’s debt-to-income ratio.
Under the new rules, several factors can be used to calculate a consumer’s debt-to-income ratio, including a consumer’s employment record, income, business credit reports, social security income and non-employment related income such as from a property rental.
Additionally, the rules explain the CFPB’s Real Estate Settlement Procedures Act rule does not preempt the field of servicing regulation by states.
The preamble to the CFPB final mortgage servicing rules made clear that Bureau authority on servicing, from the RESPA rule, does not preempt the field of possible mortgage servicing regulation by states.
However, the CFPB is adding a comment to expressly state this point and explain how the RESPA act preemption will work.
Additionally, the rules establish which mortgages to consider in determining small servicer status.
For example, loans serviced on a charitable basis will not be considered in determining whether the servicer qualifies as small.
Furthermore, the rules clarify the eligibility standard of the temporary qualified mortgage provision.
Under the ability-to-repay rule, a loan may be a considered QM if it is eligible for purchase, guarantee or insurance by Fannie Mae, Freddie Mac or by certain federal agencies — provided the loan does not contain certain risky loan features and meets certain limitations on points and fees.
The new rules clarify the standards that a loan must meet if the creditor is underwriting it based on government-sponsored enterprise or agency guidelines.
For instance, where a loan is eligible for both enterprise or agency purchase do not need to satisfy the types of procedural or technical requirements that are completed unrelated to the consumer’s ability to repay.
Click here to read the final rules.