If ever small entities questioned whether they would need to consider the Consumer Financial Protection Bureau’s (“CFPB”) new regulations pertaining to mortgage origination and servicing, now they know. The CFPB recently issued two guides for “small entities,” which “makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.” The guides provide plain language guidance on the Ability-to-Repay and Qualified Mortgage Rule and the TILA Escrow Rule.
The Ability-to-Repay and Qualified Mortgage Rule (“ATR/QM Rule”) makes a number of changes that entities must consider when originating or refinancing mortgage loans. Many institutions are already complying with the ATR/QM Rule because the Federal Reserve adopted a rule under TILA effective in 2009 that prohibited creditors from making higher-priced loans without assessing the borrowers’ ability to repay the loans. The CFPB’s ATR/QM Rule involves similar, but not identical, requirements for virtually all closed-in residential mortgage loans. The small entity guide for the ATR/QM Rule provides a good overview and discussion of the changes for organizations that originate closed-end residential mortgage loans.
The TILA Escrow Rule implements statutory changes made by the Dodd-Frank Act that lengthen the time creditors must collect and manage escrows for higher-priced mortgage loans. The TILA Escrow Rule lengthens the time escrow accounts must be maintained regardless of loan-to-value ratio, makes changes to insurance requirements for condominium and common interest communities the purchase master insurance policies, and provides a potential exemption for certain loans originated in rural and underserved areas. The final TILA Escrow Rule takes effect for applications received on or after June 1, 2013.
Contact experienced counsel to discuss any questions about how these rules apply to your organization.