FEC Corporate & Financial Services Alert
On October 22, 2014, the Consumer Financial Protection Bureau (CFPB) issued minor changes to its mortgage rules, which finalizedadjustments proposed by the CFBP in April 2014. Among the changes, the amendment provided for an ability to cure noncompliancewith the points and fees limits that apply to qualifiedmortgages.1 I. Minor Changes to Ability to Repay Requirement The Ability-to-Repay rule, established under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),generally requires creditors to make a reasonable, good faith determination of a consumers ability to repay any consumer credittransaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan). Lenders are presumed to have complied with the Ability-to-Repay rule if they issue Qualified Mortgages (QMs). The change to the mortgage rule relates to the Ability-to-Repay requirements of QMs. Currently, the points and fees charged on a QM cannot generally exceed three percent of the loan principal. The amended rule would allow lenders that learn that a QM violates this rule to resolve such an issue. Specifically, lenders may refund the excess amount, with interest, to the consumer within 210 days of making the loan. Along with the refund provisions, the change would also require creditors to create and follow policies and procedures for tracking points and fees, as well as refunds, pursuant to the Ability-to-Repay rules. Creditors in the secondary market may also make these refunds. II. Effective Date These rule amendments will take effect upon publication in the Federal Register. The final rule is available here.
1 The amendment also made the following changes to the mortgage rules: (i) established an alternative definition of "small servicer" for certain nonprofit entities; and (ii) amended the existing exemptions to the ability-to-repay rule for certain nonprofit entities.
This Alert is provided to Clients and friends of the Firm. If you have questions regarding any of the items discussed, please contact one of the following attorneys: Paul B. Benham III(501) 370-1517, Robert T. Smith(501) 370-1559, John F. Griffee IV(501) 370-1426.
Download this article here. Our firm regularly assists clients in the negotiation and preparation of various types of commercial contracts. Please contact one of the attorneys listed above if you have any questions or would like to discuss any of the topics discussed in this Alert.