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The CFPB released its long-awaited final rule laying out how lenders must ensure borrowers have the ability to repay a loan, including creating a carve-out for qualified mortgages.
January 10 -
The Consumer Financial Protection Bureau took two major steps toward reshaping the nation's residential mortgage market Monday, proposing revised mortgage disclosure requirements as well as stricter limits on high-cost loans.
July 9
WASHINGTON — Even as the Consumer Financial Protection Bureau announced Thursday long-awaited underwriting requirements for all mortgages, it also released final rules restricting fees and lump-sum payments for certain high-cost loans.
The regulations, which finalize a July 2012 proposal, bar creditors from attaching balloon payments to high-cost loans, except in rural and underserved areas. The rules also ban certain fees on modifying high-cost loans, and cap late fees at 4% of the payment that was missed. The regulations also stop lenders from incorporating closing costs into the loan amount for high-cost loans and bans prepayment penalties.
"Today's changes will better help consumers to understand the real costs of owning a home while protecting them from harmful practices that can trap them into high-cost mortgages," CFPB Director Richard Cordray said in a press release.
The protections for high-cost loans originate from the 1994 Home Ownership and Equity Protection Act. The rules not only implement Dodd-Frank Act provisions that strengthened the HOEPA restrictions but also those expanding the universe of high-cost loans subject to the protections. Home-purchase loans and home equity lines of credit are now covered, and the rate and fee triggers for what constitutes a high-cost loan were also revised. For example, a loan over $20,000 with points and fees that exceed 5% of the loan amount is now considered high-cost, down from the previous 8% trigger. First-lien mortgages with an annual percentage rate 6.5 percentage points above the prime rate is also considered high-cost.
Meanwhile, the CFPB is also requiring housing counseling for borrowers before they take out a high-cost mortgage, and increasing from one to five years the minimum duration of an escrow account associated with such loans.
