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CFPB Finalizes Minor Changes to Rules to Expand Credit Access

CFPB Expands Credit AccessThe Consumer Financial Protection Bureau (CFPB) finalized minor changes to its mortgage rules designed to ensure expanded credit access, which has been a hot topic in recent weeks.

The adjustments were proposed in April and include changes that will allow some non-profits to provide mortgage credit and servicing to populations that are underserved, and allow lenders to refund the excess amount plus interest to consumers when they exceed the points and fees cap – and still have the loan be considered a qualified mortgage (QM).

CFPB finalized several mortgage rules in January 2013 that went into effect a year later, in January 2014. The ability to repay (ATR) rule protects borrowers by requiring lenders to make a reasonable, good-faith determination as to whether prospective borrowers have the ability to repay the loan, and the new rules strongly protect homeowners, including those facing the possibility of foreclosure.

"Our mortgage rules are protecting consumers from debt traps, runarounds, and surprises," CFPB Director Richard Cordray said. "These adjustments will maintain those strong protections, while ensuring consumers have access to credit. This includes helping nonprofits that provide working families with important pathways to affordable homeownership."

Some highlights of the new rules finalized on Wednesday are as follows:

  • Define non-profit small servicers: The Bureau learned that some non-profits service loans for a fee from other non-profit lenders, and that these organizations are unable to consolidate their servicing activities and still meet the requirements for small servicer exemption from some of CFPB's new mortgage servicing rules (service 5,000 or fewer mortgage loans, among other requirements). An alternate definition of a small servicer is provided under the new rules that will allow certain 501(c)(3) non-profits to consolidate their servicing activities and still be exempt from some of CFPB's mortgage servicing rules.
  • The non-profit ability-to-repay exemption amendment: Prior to this change, certain 501(c)(3) non-profits lending to low- to moderate-income consumers were exempt from the ATR rule if they made fewer than 200 mortgage loans a year. The change will allow these non-profits to continue offering interest-free, forgivable loans known as "soft seconds," at a rate of more than 200 per year and still be exempt from the ATR rule.
  • Excess points and fees refund: Certain loans called qualified mortgages (QMs) protect the consumer under the ATR rule, and the points and fees a consumer pays on a QM cannot exceed 3 percent of the loan principal at the time the loan is made. Under the new changes, there are limited circumstances in which a lender can refund the excess amount to the consumer if it is discovered after the loan closes that the 3 percent cap has been exceeded – and the loan will still meet the legal requirements to be considered a QM. The refund must be made within 210 days of the loan being made. This change is designed to encourage lenders to expand their credit access to include potential borrowers who are at or near the points and fees limit. This provision is set to expire on January 10, 2021.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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