CFPB Proposes More Mortgage Rule Tweaks

The Consumer Financial Protection Bureau (CFPB) is again proposing a few minor modifications to its new mortgage rules, suggesting changes designed to eliminate hurdles some nonprofit organizations might encounter in providing access to credit and servicing and slightly easing one regulation regarding high-priced mortgages . 

The Bureau issued proposed amendments late Wednesday and each seems to address limited instances of unintended consequences arising from the larger rules.  One proposed amendment would apply to some small servicers which, while exempt from new mortgage servicing rules because they service 5,000 or fewer loans, also service loans for a fee from associated nonprofit housing providers and may not be able to restructure their overall activities to meet the small servicer exemption.  The new proposal offers an alternative definition of small servicers which would apply to certain 501(c) (3) nonprofit organizations and will allow them to consolidate servicing activities and maintain their current exemption from some servicing rules.  

A second proposed change would apply to an existing exemption from the Ability-to-Repay rule for organizations that make fewer than 200 mortgages a year.  The change would apply only to certain 501(c) (3) nonprofits groups such as Habitat for Humanity and would allow them to extend certain interest-free, forgivable loans or "soft seconds" without regard to the 200-loan limit

Under the Ability-to-Repay rule a consumer cannot be charged points and fees on a Qualified Mortgage that exceeds 3 percent of the loan principal.  If a lender finds it has mistakenly charged in excess of that amount a third proposed change lays out limited circumstances where the excess can be refunded to the consumer and still allow the loan meet the legal requirements of a Qualified Mortgage.  The change specifies that the refund must occur within 120 days after the loan is made and the lender must maintain and follow policies and procedures for reviewing the loans and providing refunds to consumers. CFPB said the change is designed to encourage lenders to provide access to credit to consumers seeking loans that are at or near the points and fees limit.

"Our mortgage rules are now helping to protect consumers all across the country from debt traps, runarounds, and surprises," said CFPB Director Richard Cordray. "Today's proposal would maintain those strong protections, while making minor changes to ensure consumers have access to credit. This includes helping nonprofits that provide working families with important pathways to affordable homeownership."

CFPB is seeking public comment on the changes which can be review in their entirety here.   It is also seeking input on other questions relating to the impact of the Bureau's rules, including their effect on larger lenders that do not meet the definition of small creditor.

One stakeholder immediately expressed satisfaction with the change allowing refunds of excess fees.  David H. Stevens, President and CEO of the Mortgage Bankers Association (MBA) called them a positive development for consumers which would expand access to safe, sustainable Qualified Mortgages.  "As is being considered," he said, "if a lender believes it has offered a QM loan but later discovers the points and fees exceeded 3 percent of the loan amount, the excess could be refunded to the borrower and the loan could still meet QM requirements. MBA looks forward to commenting on this proposal and working with the CFPB to ensure that these proposals work to benefit consumers to the greatest extent possible."