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  • HUD Issues Final Rule To Eliminate Post-Payment Interest On FHA Loans

    Lending

    On August 26, HUD issued its final rule prohibiting mortgagees from charging post-payment interest under FHA’s single family mortgage insurance program. The final rule is responsive to the CFPB’s ATR/QM rule, under which post-payment interest charges will be considered a prepayment penalty in connection with FHA loans closed on or after January 21, 2015. Because prepayment penalties are prohibited on higher-priced FHA loans, the new definition of “prepayment penalty” under the ATR/QM rule would have effectively prohibited the making of higher-priced FHA mortgage loans. Also effective January 21, 2015, HUD’s final rule ensures consistency among FHA single-family mortgage products and provides the same protections for all borrowers. Under the final rule, monthly interest on the debt must be calculated on the actual unpaid principal balance as of the date prepayment is received.

    CFPB FHA Qualified Mortgage Ability To Repay

  • Unofficial Transcripts of the ABA Briefing/Webcast "Mortgage Q&A with the Consumer Financial Protection Bureau"

    Lending

    To address outstanding questions regarding the new mortgage rules that took effect in January 2014, CFPB staff provided non-binding, informal guidance in a webinar hosted by the American Bankers Association (ABA). Specifically, CFPB staff answered questions regarding the mortgage origination rules and the mortgage servicing rules on April 22, 2014.

    With the ABA’s consent, BuckleySandler has prepared a transcript of the webinar that incorporates the ABA’s slides. The transcript is provided for informational purposes only and does not constitute legal opinions, interpretations, or advice by BuckleySandler. The transcript was prepared from the audio recording arranged by the ABA and may have minor inaccuracies due to sound quality. In addition, the transcripts have not been reviewed by the CFPB or the ABA for accuracy or completeness.

    Questions regarding the matters discussed in the webinar or the rules themselves may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.

     

    CFPB Mortgage Origination Mortgage Servicing Qualified Mortgage Ability To Repay

  • CFPB Adjusts CARD Act, HOEPA, And Ability To Repay Thresholds

    Consumer Finance

    On August 14, the CFPB issued a final rule to re-calculate certain threshold amounts under Regulation Z. With respect to certain amounts under the CARD Act, effective January 1, 2015, the minimum interest charge disclosure thresholds will remain unchanged, while the permissible penalty fees safe harbor will increase to $27 for a first late payment and $38 for each subsequent violation in the following six months. With respect to HOEPA loans, effective January 1, 2015, the adjusted total loan amount threshold will be $20,391, and the adjusted statutory fee trigger will be $1,020. Also effective January 1, 2015, for the purpose of a creditor’s determination of a consumer’s ability to repay a transaction secured by a dwelling, a covered transaction will not be a qualified mortgage unless the transaction’s total points and fees do not exceed: (i) 3% of the total loan amount for a loan greater than or equal to $101,953; (ii) $3,059 for a loan amount greater than or equal to $61,172 but less than $101,953; (iii) 5% of the total loan amount for a loan greater than or equal to $20,391 but less than $61,172; (iv) $1,020 for a loan amount greater than or equal to $12,744 but less than $20,391; and (v) 8% of the total loan amount for a loan amount less than $12,744.

    CFPB HOEPA CARD Act Ability To Repay

  • Special Alert: CFPB Guidance States That Successors Are Not Subject to the ATR/QM Rule

    Lending

    On July 8, the CFPB issued an interpretive rule stating that the addition of a successor as an obligor on a mortgage does not trigger the Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule) requirements if the successor previously received an interest in the property securing the mortgage by operation of law, such as through inheritance or divorce.  Creditors may rely on the interpretive rule as a safe harbor under section 130(f) of TILA.

    In adopting the interpretations described below, it appears that the CFPB primarily intended to respond to inquiries from the industry and consumer advocates about situations where one family member inherits a home from another and, in order to keep the home, requests to be added to the mortgage and to modify its terms, such as by reducing the rate or payments.

    Click here to view the special alert.

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    Questions regarding the matters discussed in the Alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.

     

    CFPB Mortgage Origination Mortgage Servicing Qualified Mortgage Ability To Repay

  • Special Alert: CFPB Proposes Amendments To Mortgage Rules

    Lending

    On April 30, the Consumer Financial Protection Bureau (CFPB or Bureau) proposed targeted amendments to the Dodd-Frank Act mortgage rules that took effect in January 2014. Comments are due 30 days after publication of the proposal in the Federal Register.

    Ability-to-Repay/Qualified Mortgage

    • Points and fees cure. The CFPB proposed a post-consummation cure mechanism for loans that are originated with the good faith expectation of qualified mortgage (QM) status but exceed the points and fees limit for QMs. Specifically, the Bureau’s proposal would allow the loan to retain QM status if the excess points and fees are refunded to the borrower within 120 days after consummation by the creditor or assignee.

      In proposing this amendment, the Bureau acknowledged that “[t]he calculation of points and fees is complex and can involve the exercise of judgment that may lead to inadvertent errors.” The Bureau further acknowledged that “some creditors may not originate, and some secondary market participants may not purchase, mortgage loans that are near the [QM] limits on points and fees because of concern that the limits may be inadvertently exceeded at the time of consummation.” As a result, creditors seeking to originate QMs may establish buffers to avoid exceeding the points and fees limit and “refuse to extend mortgage credit to consumers whose loans would exceed the buffer threshold, either due to the creditors’ concerns about the potential liability attending loans originated under the general ability-to-repay standard or the risk of repurchase demands from the secondary market if the qualified mortgage points and fees limit is later found to have been exceeded.” The Bureau expressed concern that such buffers would negatively affect the cost and availability of credit.

    • Debt-to-income cure. The Bureau did not propose a cure for loans that inadvertently exceed the 43% debt-to-income ratio (DTI) requirement for QMs made under Appendix Q. The Bureau did, however, request comment on the question, noting concerns that creditors may establish DTI buffers that would affect access to credit. For a DTI cure provision to be considered, the Bureau stated that “creditors would need to maintain and follow policies and procedures of post-consummation review of loans to restructure them and refund amounts as necessary to bring the debt-to-income ratio within the 43-percent limit.” However, the Bureau expressed skepticism that creditors could realistically meet such a requirement.

      The Bureau stated that it would also consider allowing creditors or assignees to correct DTI overages that result solely from errors in documentation of debt or income. However, the Bureau expressed concern that such a process might lead to post-consummation underwriting and requested comment on “whether or how a debt-to-income cure or correction provision might be exploited by unscrupulous creditors to undermine consumer protections and undercut incentives for strict compliance efforts by creditors or assignees.”

    • Non-profit small creditor exemption. The CFPB proposed to amend the exemption for non-profit lenders that make 200 or fewer dwelling-secured loans in a year to exclude from that limit certain interest-free, contingent subordinate liens commonly offered by affordable homeownership programs.
    • Other small creditor exemptions. The Bureau requested feedback and data from smaller creditors regarding the 500 loan limit on first lien mortgages for “small creditor” status, the implementation of the Dodd-Frank Act mortgage rules by small creditors, and how small creditors’ origination activities have changed in light of the new rules.

    Mortgage Servicing

    • Non-profit small servicer exemption. The CFPB proposed to provide an alternative definition of “small servicer,” that would apply to certain non-profit entities that service for a fee loans on behalf of other non-profit chapters of the same organization that do not fall within the Bank Holding Company Act definition of “affiliate.” Adoption of the proposal would exempt these entities would be exempt from the Regulation Z periodic statement requirements as well as certain provisions in Regulation X regarding force-placed insurance, servicing policies and procedures, and loss mitigation.

    Additional Amendments

    The CFPB also stated that it expects to issue additional proposals to address other topics relating to the Dodd-Frank Act mortgage rules, including the definition of “rural and underserved” for purposes of certain mortgage provisions affecting small creditors.

     

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    Questions regarding the matters discussed in the Alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.

     

    CFPB Mortgage Origination Mortgage Servicing Qualified Mortgage Ability To Repay Loss Mitigation

  • Idaho Bill Regulates Payday Loan Terms

    Consumer Finance

    On March 26, Idaho enacted SB 1314, which, among other things, prohibits payday lenders from making a loan that exceeds 25% of the borrower’s gross monthly income at the time the loan is made. The bill provides a safe harbor for lenders if the borrower presents evidence of gross monthly income or represents in writing that the payday loan does not exceed 25% of the borrower's gross monthly income. The bill also requires lenders to, upon request, allow borrowers to enter into extended repayment plans. Lenders cannot charge any additional fees related to such plans, but lenders are not required to enter into an extended plan with a borrower more than one time in any 12-month period. Finally, the bill requires specific written disclosures and prohibits payday lenders from presenting a borrower’s check to a depository institution more than two times. The changes take effect July 1, 2014.

    Payday Lending Ability To Repay

  • New Mexico Supreme Court Analyzes State's Foreclosure Standing Requirements, Ability To Repay Standard

    Lending

    On February 13, the New Mexico Supreme Court held that a borrower’s ability to repay a home mortgage loan is one of the “borrower’s circumstances” that lenders and courts must consider in determining compliance with the New Mexico Home Loan Protection Act (HLPA). Bank of New York v. Romero, No. 33,224, 2014 WL 576151 (N.M. S. Ct. February 13, 2014). In this case, after two borrowers became delinquent on a cash-out refinance mortgage loan, a bank initiated a foreclosure action in state court. The trial court and appellate court rejected the borrowers’ arguments that the bank failed to establish that it was the holder of the note and that the loan violated the “anti-flipping provision” of the HLPA, which prohibits creditors from knowingly and intentionally making a refinance loan when the new loan does not have reasonable, tangible net benefit to the borrower considering all of the circumstances—i.e. “flipping” a home loan. The Supreme Court reviewed the state’s stringent standing requirements and held that possession of the note alone is insufficient to establish standing and that the bank failed to provide other evidence sufficient to demonstrate transfer of the note. Although its decision on standing mooted the issue of the alleged HLPA violation, the court decided to address the issue given some party may eventually establish standing to foreclose. The court, in what might be considered dicta, stated that although the “anti-flipping provision” of the HLPA did not specifically include ability to repay as a factor to be considered in assessing the “borrower’s circumstances,” it could find “no conceivable reason why the Legislature in 2003 would consciously exclude consideration of a borrower’s ability to repay the loan as a factor of the borrower’s circumstances.” As such, the court stated that the HLPA’s “reasonable, tangible net benefit” requirement must include as a factor “the ability of a homeowner to have a reasonable chance of repaying a mortgage loan,” and that here the lender failed to do so when it claimed to rely solely on the borrowers’ assertions about their income and failed to review tax returns or other documents to confirm those assertions. Finally, the court also stated that (i) the National Bank Act does not expressly preempt the HLPA; (ii) the bank failed to prove that conforming to the dictates of the HLPA prevents or significantly interferes with its operations; and (iii) the HLPA does not create a discriminatory effect. The Supreme Court reversed the lower courts’ decisions and remanded to the district court with instructions to vacate its foreclosure judgment and to dismiss the bank’s foreclosure action for lack of standing.

    Foreclosure Mortgage Origination Mortgage Servicing Refinance Ability To Repay

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