Consumer Financial Protection Bureau Law Blog

FHFA Limits Fannie and Freddie to “Qualified Loans”: Another Strike Against Non-Qualified Loans and the Consumers Who Rely on Them

In January, the CFPB issued its final Qualified Mortgage Rule (QMR) creating a safe harbor for lenders from liability for loans that meet its criteria for a “qualified mortgage.” The Federal Housing Finance Authority (FHFA) has endorsed this Rule by barring Fannie Mae and Freddie Mac from purchasing non-qualified mortgages. This means that, beginning in January 2014 when the QRM takes effect, Fannie and Freddie will no longer be permitted to purchase: (i) loans with terms over 30 years, (ii) interest-only loans; (iii) negative amortization or ballooning principal loans; or (iv) loans with points and fees exceeding the thresholds set by the CFPB. The one exception the FHFA made is for loans that meet Fannie’s and Freddie’s underwriting and delivery standards. According to the FHFA, the “[a]doption of these new limitations by Fannie Mae and Freddie Mac is in keeping with FHFA’s goal of gradually contracting their market footprint and protecting borrowers and taxpayers.” These limitations also add to the growing number of disincentives for lenders to offer non-qualifying loans, which could constrict access to credit for those who may need it the most. 

CFPB Issues Guidance to Small Businesses on Ability-to-Repay and QM: A Primer Not Just for Small Business Consumption

As our readers well know, the CFPB adopted rules in 2013 implementing the Ability to Repay/Qualified Mortgage (ATR/QM) provisions of the Dodd-Frank Act. By January 2014, these rules will apply to everyone.  However, on April 10, the CFPB published a small entity guide to ATR/QM that contains useful information for any entity that may be required to comply.  Written in a plain English FAQ format, the guide is packed with detailed information about the rules and is a worthwhile desk reference for those looking for the requisite detail, without the bulk associated with both the rule and the official staff interpretations.  For those more comfortable with charts, the CFPB has likewise published a summary comparison of the ability-to-repay, qualified mortgage, GSE qualified mortgage and balloon-payments QM’s.  Stay tuned.

CFPB Implementation Strategy for New Mortgage Rules

Although the CFPB’s new mortgage rules (“Mortgage Rules”) are less than a month old and do not go into effective until January 10, 2014, the CFPB is not wasting any time putting the mortgage industry on notice that it expects these rules to be “implemented accurately and expeditiously.” Today, the Bureau announced that it will be implenting a plan over the course of this year “that focuses on the mortgage industry’s compliance with new consumer protections.” While the full extent of the CFPB’s implementation “plan” is unknown, today’s announcement provides an insight into the CFPB’s expectations of mortgage industry. Read More ›

Will the QM rules Harm the Mortgage Market?

In a January 14, 2013 "issue brief" published by The Heritage Foundation, research fellows Diane Katz and David John argue that the CFPB's new qualified mortgage (QM) rules will frustrate the market, thereby adversely impacting traditional supply and demand principles.  Read More ›

CFPB Ability-to-Repay Rule Announcement: Nobody is Completely Satisfied with the Rule

During yesterday’s field hearing in Baltimore, the CFPB announced its final Ability-to-Repay (ATR) rule and hosted a panel discussion to discuss the new rule, which had not been released at the time of the hearing. While the hearing’s participants were generally supportive of the CFPB efforts, representatives from both consumer rights groups and financial institutions expressed some concerns about the rule. Banking industry representatives and credit union officials each suggested that the new regulations could limit their ability to make more home loans. Consumer groups, on the other hand, argued that rules are not sufficient to protect consumers. Dykema’s Ashley Hutto-Schultz attended the hearing and provided this report. Read More ›

CFPB Issues Long-Awaited Ability-to-Repay Rule and Qualified Mortgage Definition

In the hours leading up to its scheduled public field hearing on mortgage policy today in Baltimore, the Bureau of Consumer Financial Protection ("CFPB") has issued its final Ability-to-Repay Rule ("ATR Rule"). Heather Hutchings of Dykema's Financial Services Regulatory & Compliance group has put together an initial analysis of the rule, which analysis is available here. In his prepared remarks for the January 10 public hearing in Baltimore, Director Cordray remarked, “[o]ur goal with the Ability-to-Repay rule is to make sure that people who work hard to buy their own home can be assured of not only greater consumer protections but also reasonable access to credit so they can get a sustainable mortgage.” Industry insiders, however, have expressed some initial uneasiness with the CFPB’s preview of the rule..  Debra W. Still, chairwoman of the Mortgage Bankers Association, warns "We remain concerned that certain aspects of it could curb competition, increase costs and tighten credit availability for borrowers.”

The new rule sets forth the following regulations and limitations:  

Watch the CFPB's Public Hearing On The Ability To Repay Rule

Last night, shortly after midnight, the CFPB announced that it would be releasing its final Ability to Repay Bill rule and "Qualified Mortgage" definition  at today's public hearing in Baltiomore. You can watch the announcement live here. Director Cordray's prepared remarks can be found here. Stay tuned to the CFPB-Lawblog for analysis of this new rule.

Shameless Plug- CFPB-Lawblog Editor Don Lampe Featured Panelist at 2nd Annual Mortgage Regulatory Forum

Donald C. Lampe, editor of the CFPB-Lawblog and member and leader of Dykema's Financial Services Regulatory and Compliance team, will participate this week in a panel discussion on "New Mortgage Servicing Practices" at the National Mortgage News 2nd Annual Mortgage Regulatory Forum in Arlington, Virginia.  Read More ›

CFPB Issues New Rules Further Regulating Mortgage Points and Fees and Qualifcations for Mortgage Originators

Earlier today the CFPB issued a proposed rule that would further regulate points and fees associated with mortgages, as well as change existing rules governing mortgage loan originators’ qualifications and compensation. Director Cordray indicated that the new rules are necessary to “to provide consumers with clearer options and enable them to choose the loan that they believe is right for them.” Read More ›

CFPB Proposes New Rule Requiring New Disclosures and Dissemination of Appraisals to Loan Applicants

This morning the CFPB issued a proposed rule requiring mortgage lenders to provide free copies of all written appraisals and valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling no later than three days before closing, regardless of whether credit is extended, denied, incomplete or withdrawn.  This rule would modify the existing requirement of providing copies of written appraisals to consumers on request. Moreover, and in seeming contradiction to the CFPB’s general goal of reducing redundancy, the rule would also require creditors to notify applicants in writing -- at the time they submit a loan application -- of their right to receive a copy of each written appraisal or valuation.  That is, if the applicant is already receiving it by virtue of the proposed rule, it is entirely unclear why they would need to be informed of that right. Such a notification would make more sense if the consumer merely had an option to request the data. Read More ›