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  • CFPB amends General QM loan definition, creates definition for Seasoned QMs

    Agency Rule-Making & Guidance

    On December 10, the CFPB issued two final rules related to qualified mortgage (QM) loans. The first of the two final rules, the General QM Final Rule, amends Regulation Z and revises the definition of a General QM by eliminating the General QM loan definition’s 43 percent debt-to-income ratio (DTI) limit and replacing it with bright-line price-based thresholds. The General QM Final Rule also eliminates QM status resulting solely from loans meeting qualifications for sale to Fannie or Freddie Mac (GSEs), known as the so-called “GSE Patch.” The Bureau’s second final rule, the Seasoned QM Final Rule, creates a new category of safe-harbor QMs applicable to first-lien, fixed-rate mortgages that are held in portfolio by the originating creditor or first purchaser for a 36-month period while meeting certain performance requirements, and comply with general restrictions on product features and points and fees.

    Both final rules become effective 60 days after publication in the Federal Register. The mandatory compliance date for the General QM Final Rule is July 1, 2021; however, the Bureau notes that, between the effective date and the mandatory compliance date, there will be an optional early compliance period during which creditors will be able to use either the current General QM definition or the revised General QM definition. In addition, the GSE Patch will be available only for transactions where the creditor receives the consumer’s application before July 1, 2021 (or earlier if the GSEs exit conservatorship). Further, the Seasoned QM Final Rule applies to covered transactions for which creditors receive an application on or after the effective date, but will not apply retroactively to loans already in a lender’s portfolio.

    Buckley will follow up with a more detailed summary of the final rules soon.

    Agency Rule-Making & Guidance CFPB GSE Patch GSE Qualified Mortgage Mortgages Ability To Repay Regulation Z

  • CFPB finalizes Advisory Opinions Policy, issues two opinions

    Federal Issues

    On November 30, the CFPB announced the finalization of its Advisory Opinions Policy, which will allow entities seeking to comply with existing regulatory requirements to request an advisory opinion in the form of an interpretive rule from the Bureau to address areas of uncertainty. Persons or entities interested in submitting a request for an advisory opinion should email advisoryopinion@cfpb.gov. As previously covered by InfoBytes, last June the Bureau launched a pilot advisory opinion program to focus primarily on clarifying ambiguities in Bureau regulations, and issued a request for public comment on a proposal for a new policy on advisory opinions. Under the final policy, the Bureau will review submissions, prioritize requests for response, issue opinions with a description of the incoming request, and “may also decide to issue advisory opinions on its own initiative.” All advisory opinions will be published in the Federal Register to increase transparency. The Bureau notes that it will prioritize open questions within its purview that can be addressed legally through an interpretive rule and adds that it “intends to further evaluate potential topics for advisory opinions based on additional factors, including: alignment with the Bureau’s statutory objectives; size of the benefit offered to consumers by resolution of the interpretive issue; known impact on the actions of other regulators; and impact on available Bureau resources.”

    Concurrently, the Bureau issued two advisory opinions: one on earned wage access (EWA) products and one clarifying the definition of certain student education loan products. The EWA advisory opinion addresses the uncertainty as to whether EWA providers that meet short-term liquidity needs that arise between paychecks “are offering or extending ‘credit’” under Regulation Z, which implements TILA. The advisory opinion states that “a Covered EWA Program does not involve the offering or extension of ‘credit,’” noting that the “totality of circumstances of a Covered EWA Program supports that these programs differ in kind from products the Bureau would generally consider to be credit.”

    The second advisory opinion addresses a different area of uncertainty concerning the application of Regulation Z, clarifying that “loan products that refinance or consolidate a consumer’s pre-existing Federal, or Federal and private, education loans meet the definition of ‘private education loan’ in [TILA] and Regulation Z and are subject to the disclosure and consumer protection requirements in subpart F of Regulation Z.”

    Federal Issues CFPB Advisory Opinion Regulation Z

  • Agencies finalize certain 2021 thresholds

    Agency Rule-Making & Guidance

    On November 18, the CFPB, OCC, and the Federal Reserve Board announced a final rule, which increases the TILA smaller loan exemption threshold for the special appraisal requirements for higher-priced mortgage loans (HPMLs). TILA requires creditors to obtain a written appraisal before making a HPML unless the loan amount is at or below the threshold exemption. Each year the threshold must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The exemption threshold for 2021 is $27,200, which remains at the same level it was in 2020.

    Additionally, the CFPB and the Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of TILA (Regulation Z) and Consumer Leasing Act (Regulation M) (available here and here), as required by the Dodd-Frank Act. The exemption threshold for 2021, based on the annual percentage increase in the CPI-W, remains unchanged at $58,300 or less, except for private education loans and loans secured by real or personal property used or expected to be used as the principal dwelling of a consumer, which are subject to TILA regardless of the amount.

    The final rules take effect on January 1, 2021.

    Agency Rule-Making & Guidance CFPB OCC Federal Reserve Regulation Z Regulation M TILA Consumer Leasing Act Mortgages

  • CFPB settles with ninth lender on misleading VA advertising

    Federal Issues

    On October 26, the CFPB announced a settlement with a ninth mortgage lender for mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that allegedly contained misleading statements or lacked required disclosures. According to the Bureau, the lender allegedly sent false, misleading, and inaccurate direct-mail advertisements for VA guaranteed mortgage loans to servicemembers and veterans in violation of the CFPA, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. Among other things, the Bureau alleged the advertisements (i) stated credit terms that the lender was not actually prepared to offer, such as the interest rate and annual percentage rate applicable to the advertised mortgage; (ii) made misrepresentations about “the existence, nature, or amount of cash or credit available to the consumer in connection with the mortgage”; (iii) failed to include required disclosures; (iv) gave the false impression that the mortgage products would help eliminate or reduce debt; and (v) made misleading comparisons in advertisements involving actual or hypothetical loan terms.

    The settlement imposes a civil money penalty of $1.8 million and bans the lender from future advertising misrepresentations similar to those identified by the Bureau. Additionally, the settlement requires the lender to use a compliance official to review mortgage advertisements for compliance with consumer protection laws, and to comply with certain enhanced disclosure requirements.

    The latest enforcement action is part of the Bureau’s “sweep of investigations” related to deceptive VA-mortgage advertisements. Previously, the Bureau issued consent orders against eight other mortgage lenders for similar violations, covered by InfoBytes here, here, here, and here.

    Federal Issues CFPB Enforcement Settlement Mortgages Servicemembers CFPA MAP Rule Regulation Z Disclosures

  • CFPB settles with eighth lender on misleading VA advertising

    Federal Issues

    On September 14, the CFPB announced a settlement with an eighth mortgage lender for mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that allegedly contained misleading statements or lacked required disclosures. According to the Bureau, the lender offers and provides VA guaranteed mortgage loans, and allegedly sent false, misleading, and inaccurate direct-mail advertisements to servicemembers and veterans in violation of the CFPA, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. Among other things, the Bureau alleged the advertisements (i) failed to include required disclosures; (ii) stated credit terms that the lenders were not actually prepared to offer; (iii) made “misrepresentations about the existence, nature, or amount of cash available to the consumer in connection with the mortgage credit product”; (iv) gave the false impression the lenders were affiliated with the government; and (v) used the name of the consumer’s current lender in a misleading way.

    The settlement imposes a civil money penalty of $625,000 and bans the lender from future advertising misrepresentations similar to those identified by the Bureau. Additionally, the settlement requires the lender to use a compliance official to review mortgage advertisements for compliance with consumer protection laws.

    The latest enforcement action is part of the Bureau’s “sweep of investigations” related to deceptive VA-mortgage advertisements. Previously, the Bureau issued consent orders against seven other mortgage lenders for similar violations, covered by InfoBytes herehere and here.

    Federal Issues CFPB Mortgages Department of Veterans Affairs Mortgage Lenders CFPA UDAAP MAP Rule Regulation Z

  • CFPB settles with three more lenders on misleading VA advertising

    Federal Issues

    Recently, the CFPB announced settlements (see here, here, and here) with three mortgage lenders for mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that allegedly contained misleading statements or lacked required disclosures. According to the Bureau, the lenders offer and provide VA guaranteed mortgage loans, and allegedly sent false, misleading, and inaccurate direct-mail advertisements to service members and veterans in violation of the CFPA, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. Among other things, the Bureau alleges the advertisements (i) failed to include required disclosures; (ii)  stated credit terms that the lenders were not actually prepared to offer; (iii) made “misrepresentations about the existence, nature, or amount of cash available to the consumer in connection with the mortgage credit product”; and (iv) gave the false impression the lenders were affiliated with the government. Two of the lenders also allegedly used the name of the consumer’s current lender in a misleading way, and misrepresented that consumers would receive specific escrow refund amounts if they refinanced their mortgages, even though the advertised amounts “were calculated using a methodology that had no bearing on the actual escrow refund amount,” and consumers were often required to fund new escrow accounts upon generating new loans.

    In addition, one of the lender’s advertisements represented to consumers that they could “‘[s]kip two payments’ or ‘miss’ two payments by refinancing with the company,” but failed to disclose, among other things, that the skipped or missed payments would be added to the loan’s principal balance.

    The consent orders (see here, here and here) impose bans on future advertising misrepresentations similar to those identified by the Bureau, require the lenders to use a compliance official to review mortgage advertisements for compliance with consumer protection laws, and require compliance with certain enhanced disclosure requirements. The Bureau further imposes civil penalties of $225,000, $50,000, and $230,000 respectively against the lenders.

    The latest enforcement actions are part of the Bureau’s “sweep of investigations” related to deceptive VA-mortgage advertisements. In August and July, the Bureau issued consent orders against four other mortgage lenders for similar violations, covered by InfoBytes here and here.

     

    Federal Issues CFPB Enforcement Mortgages Department of Veterans Affairs Mortgage Broker Mortgage Lenders CFPA UDAAP MAP Rule Regulation Z

  • CFPB settles with two mortgage companies over misleading VA loan advertisements

    Federal Issues

    On August 26, the CFPB announced a settlement with a mortgage company to resolve allegations that the company, which is licensed as a mortgage broker or lender in approximately 11 states, sent false, misleading, and inaccurate direct-mail advertisements to servicemembers and veterans for its VA-guaranteed loans in violation of the CFPA, Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. According to the Bureau, among other things, the mortgage company (i) advertised credit terms that the lenders were not actually prepared to offer; (ii) failed to clearly and conspicuously disclose payment terms; (iii) made numerous “misrepresentations about the existence, nature, or amount of cash available to the consumer in connection with the mortgage credit product”; and (iv) misrepresented the consumer’s repayment obligations by failing to state the amount of each payment that would apply over the term of the loan or failing to clearly and conspicuously state that actual payment obligations would be greater. In addition to a $260,000 civil money penalty, the consent order requires the company to enhance its compliance functions, designate a compliance official to review mortgage advertisements for compliance with consumer protection laws, and comply with certain enhanced disclosure requirements. Additionally, the company is prohibited from making similar misrepresentations in the future.

    Earlier on August 21, the CFPB also announced a settlement with a mortgage company to resolve allegations that the company sent false, misleading, and inaccurate direct-mail advertisements to servicemembers and veterans for its VA-guaranteed loans in violation of the CFPA, Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. According to the Bureau, among other things, the mortgage company (i) advertised credit terms that the lenders were not actually prepared to offer; (ii) described variable-rate loans as “fixed,” when in fact the rates were adjustable; (iii) falsely stated or implied that consumers with “FICO scores as low as 500” would qualify for advertised rates; and (iv) gave the false impression the lenders were affiliated with the government. In addition to a $150,000 civil money penalty, the consent order prohibits the company from making similar misrepresentations and requires the company to designate a compliance official to review mortgage advertisements for compliance with consumer protection laws.

    The latest enforcement actions are part of the Bureau’s “sweep of investigations” related to deceptive VA-mortgage advertisements. In July, the Bureau issued consent orders with two other mortgage lenders for similar violations, covered by InfoBytes here.

    Federal Issues CFPB Mortgages Department of Veterans Affairs Mortgage Broker Mortgage Lenders CFPA UDAAP MAP Rule Regulation Z Enforcement

  • CFPB settles with two mortgage lenders for misleading VA loan advertisements

    Federal Issues

    On July 24, the CFPB announced settlements with two mortgage lenders (here and here) for allegedly mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that allegedly contained misleading statements or lacked required disclosures. According to the Bureau, both lenders offer and provide VA guaranteed mortgage loans, and allegedly disseminated direct-mail advertisements to servicemembers and veterans in violation of the Mortgage Acts and Practices – Advertising Rule (MAP Rule) and Regulation Z. Among other things, the Bureau alleges the advertisements (i) stated credit terms that the lenders were not actually prepared to offer; (ii) described introductory interest rates as “fixed,” when in fact, the rates were adjustable; (iii) gave the false impression the lenders were affiliated with the government; and (iv) used the name of the consumer’s current lender in a misleading way. Both consent orders impose bans on future advertising misrepresentations similar to those identified by the Bureau and require the companies to use a compliance official to review mortgage advertisements for compliance with consumer protection laws. The Bureau imposes a civil penalty of $460,000 against one lender and a civil penalty of $645,000 against the other.

    Federal Issues CFPB Mortgages Department of Veterans Affairs Mortgage Lenders CFPA UDAAP MAP Rule Regulation Z

  • CFPB adjusts annual dollar amount thresholds under TILA regulations

    Agency Rule-Making & Guidance

    On July 17, the CFPB released the final rule revising the dollar amounts for provisions implementing the Truth in Lending Act (TILA) and amendments to TILA, including the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), the Home Ownership and Equity Protection Act of 1994 (HOEPA), and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s ability-to-repay and qualified mortgage (ATR/QM) provisions. The CFPB is required to make annual adjustments to dollar amounts in certain provisions in Regulation Z, and has based the adjustments on the annual percentage change reflected in the Consumer Price Index in effect on June 1, 2020. The following thresholds will be effective on January 1, 2021:

    • For open-end consumer credit plans under TILA, the threshold for disclosing an interest charge will remain unchanged at $1.00;
    • For open-end consumer credit plans under the CARD Act, the adjusted dollar amount for the safe harbor for a first violation penalty fee will remain unchanged at $29, and the adjusted dollar amount for the safe harbor for a subsequent violation penalty fee will also remain unchanged at $40;
    • For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages will be $22,052, and the adjusted points and fees dollar trigger for high-cost mortgages will be $1,103; and
    • The maximum thresholds for total points and fees for qualified mortgages under the ATR/QM rule will be: (i) three percent of the total loan amount for loans greater than or equal to $110,260; (ii) $3,308 for loan amounts greater than or equal to $66,156 but less than $110,260; (iii) five percent of the total loan amount for loans greater than or equal to $22,052 but less than $66,156; (iv) $1,103 for loan amounts greater than or equal to $13,783 but less than $22,052; and (v) eight percent of the total loan amount for loan amounts less than $13,783.

    Agency Rule-Making & Guidance CFPB TILA Regulation Z CARD Act Credit Cards HOEPA Qualified Mortgage Dodd-Frank

  • CFPB issues proposed rule on Regulation Z HPML escrow exemptions

    Agency Rule-Making & Guidance

    On July 2, the CFPB issued a notice of proposed rulemaking (NPRM) to amend Regulation Z, as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act, and exempt certain insured depository institutions and credit unions from the requirement to establish escrow accounts for certain higher-priced mortgage loans (HPMLs). Under the proposed amendment, any loan made by an insured depository institution or credit union that is secured by a first lien on the principal dwelling of a consumer would be exempt from Regulation Z’s HPML escrow requirement if (i) the institution has assets of no more than $10 billion; (ii) “the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year”; and (iii) the institution meets certain existing HPML escrow exemption criteria. Comments on the NPRM will be accepted for 60 days following publication in the Federal Register.

    Agency Rule-Making & Guidance CFPB Escrow Mortgages Regulation Z TILA EGRRCPA

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