The Consumer Financial Protection
Bureau (CFPB) has issued another set of proposed clarifications and
revisions to the mortgage rules it released in January. The Bureau
said it hoped the changes would resolve questions that have arisen
during the initial implementation of the rules and "help the rules
deliver their intended value for consumers."
The changes involve three sets of
The Ability-to-Repay rule which
sets out requirements for lenders to make a reasonable, good-faith
determination that prospective borrowers can repay the loans for
which they are applying;
Mortgage servicing rules which
establish protections for homeowners facing foreclosure;
Loan originator compensation rules
that prohibit some of the activities that encouraged originators to
steer borrowers toward risky or high-priced loans.
CFPB is inviting public comment on the
following proposed changes until July 22.
The CFPB servicing rules mandate a five-day deadline to
acknowledge receipt of a loss mitigation application and note whether
or not that application is complete. The proposal clarifies that
servicers are required to seek the additional information from the
borrower if they cannot complete the assessment without it and
requires that servicers ensure that borrowers do not lose certain
protections under the rule until the borrower has had a reasonable
time to remedy the application's deficiencies.
Another proposed change would make it easier for servicers to
offer short-term forbearance plans for delinquent borrowers who need
only temporary relief. This would avoid the need for a full
loss-mitigation evaluation process.
Some Ability-to-Repay prohibitions contain exceptions for small
creditors that operate primarily in "rural" or "underserved"
areas. CFPB previously announced it would reexamine the definitions
of those two terms over the next two years but is now proposing to
clarify how creditors might proceed while that reexamination is
underway. The Bureau proposes to extend an exemption to a ban on
high-cost mortgages with balloon payments and would revise an
exemption from a requirement to maintain escrows on certain higher
priced mortgages to small creditors that do not operate primarily in
rural or underserved areas as long as the loans meet certain
restrictions and criteria. .The proposal would extend availability
to small creditors that qualified as such in any of the previous
three calendar years.
A number of questions have arisen about the Dodd-Frank Act
prohibition of creditors financing of credit insurance premiums. The
proposal would clarify what constitutes financing of credit insurance
premiums by a creditor - particularly as the rule applies to
"level" or "levelized" premiums, where the monthly premium is
the same each month rather than decreasing along with the loan
balance. It would also provide guidance on when credit insurance
premiums are considered to be calculated and paid on a monthly basis
for purposes of an exclusion from the statutory prohibition.
Under the CFPB's new rules, persons classified as loan
originators are required to meet qualification requirements, and are
subject to certain restrictions on compensation practices. Today's
proposal would clarify the circumstances under which a loan
originator's or creditor's administrative staff acts as loan
For retailers of manufactured homes and their employees, the
proposal would clarify what compensation must be counted toward
certain thresholds for points and fees under the ability-to-repay and
high-cost mortgage rules.
CFPB is also seeking comment on whether the effective date of
portions of the loan originator rule and the ban on financing of
credit insurance should be changed slightly from their current
effective dates of January 14, 2010.
"When we published our mortgage rules, we pledged to be
attentive to issues that arose through the implementation process,"
said CFPB Director Richard Cordray. "Today's proposal revises and
clarifies certain aspects of our rules to ease implementation and to
pave the way for more effective consumer protections in the
The Bureau recently published a new Regulatory Implementation web
page, which consolidates all of the new 2013 mortgage rules and
related implementation materials, and can be found here: