CFPB Proposes Revisions to Mortgage Rules

The ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/ (CFPB) announced Monday proposed revisions to its ability-to-repay rule, mortgage servicing rules, and rules regarding consumer protections.

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""Today's proposal revises and clarifies certain aspects of our rules to ease implementation and to pave the way for more effective consumer protections in the marketplace,"" said Richard Cordray, director of the CFPB.

One of the clarifications specified in Monday's announcement is the definition of a loan originator. CFPB rules detail qualifications and compensation guidelines for loan originators, and industry participants have expressed a need to ensure tellers and administrative staff are not considered loan originators for the purposes of these new guidelines.

The CFPB also clarified rules relating to loss mitigation. If a loss mitigation application is incomplete, the servicer must notify the applicant within five days and let him/her know what is missing.

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The bureau's proposal would outline procedures services should follow if information is missing. For one, the proposal clarifies servicers must seek the missing information from the borrower if it is needed for a complete assessment. Furthermore, the proposal seeks to ensure consumers do not lose foreclosure protections under the rule until they have ""had a reasonable time to supply the needed documents or information,"" according to the CFPB.

The proposal would also allow servicers to offer short-term forbearance plans to delinquent borrowers without going through a full loss mitigation evaluation process first.

Monday's proposals also addressed the ban on financing credit insurance premiums, which is set forth in Dodd Frank and in the CFPB's loan originator compensation rules.

""The proposal would provide guidance on when credit insurance premiums are considered to be calculated and paid on a monthly basis for purposes of an exclusion from the statutory prohibition,"" the CFPB stated.

Additionally, the CFPB proposed changing the implementation date of this and other compensation-related rules from January 10, 2014 to January 1, 2014.

""The Bureau believes that having the rule take effect at the beginning of a calendar year may help compliance since compensation plans, training, and licensing and registration are often structured on an annual basis,"" the CFPB said.

The CFPB also plans to spend the next two years refining its definitions of ""rural"" and ""underserved"" areas for the purposes of encouraging lending and protecting consumers in these areas. Small creditors not operating in these areas would be exempt from some rules, such as the ban on high-cost balloon mortgages.