On May 2, the CFPB published three additional guides to assist companies seeking to comply with its HOEPA rule, ECOA valuations rule, and TILA high-priced mortgage appraisal rule. As with other prior guides it has released, the CFPB cautions that the guides are not a substitute for the rules and the Official Interpretations, and that the guides do not consider other federal or state laws that may apply to the origination of mortgage loans. BuckleySandler also has prepared detailed analyses of these and other CFPB mortgage rules.
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.
On January 10, the CCFPB issued a final rule that amends Regulation Z (Truth in Lending) to implement changes to the Home Ownership and Equity Protection Act (HOEPA) made by the Dodd-Frank Act. As detailed in BuckleySandler’s Special Alert, the rule expands the types of loans subject to HOEPA, revises the tests for whether a loan is “high-cost” and therefore subject to HOEPA, imposes new restrictions on high-cost loans, and requires new disclosures. Because of the special requirements for loans that meet HOEPA’s high-cost tests, the HOEPA threshold has acted as a de facto usury ceiling for the vast majority of mortgage originators. With the rule’s extension of HOEPA to more types of loans, and the lowering of the HOEPA thresholds, this ceiling will now affect a broader segment of consumers seeking mortgage loans than before. The rule also implements two additional Dodd-Frank Act provisions that are not amendments to HOEPA related to homeownership counseling. Click here to download BuckleySandler’s detailed analysis of the final high-cost mortgage rule.
On January 10, the CFPB issued the final version of a rule that will require creditors to verify a consumer’s ability to repay prior to making a consumer credit transaction secured by a dwelling. The rule defines a “qualified mortgage,” providing a safe harbor from liability for loans with an APR below Regulation Z’s “higher-priced” threshold of 150 basis points above the Average Prime Offer Rate, and a “rebuttable presumption” for loans with an APR above that threshold. The rule will become effective on January 10, 2014. Concurrently, the CFPB released a proposal seeking comment on amendments to the final rule that would, among other things, provide exemptions for certain community-based lenders and small portfolio creditors and potentially change the treatment of indirect lender compensation for purposes of the qualified mortgage “points and fees” test. BuckleySandler has prepared a Special Alert that highlights a few key issues resolved and left open by the nearly 1,000-page releases on the rule and concurrent proposal. We will distribute a summary and additional analysis of key issues in the releases once we complete our review of them.
Also on January 10, the CFPB issued two final rules related to high-cost mortgages. The first rule amends Regulation Z to implement changes to TILA made by the Dodd-Frank Act that lengthen the time for which a mandatory escrow account established for a higher-priced mortgage loan must be maintained. This rule also exempts certain transactions from the statute’s escrow requirement. The second rule, which also amends Regulation Z to incorporate Dodd-Frank Act statutory changes, expands the types of mortgage loans that are subject to the protections of the Home Ownership and Equity Protections Act of 1994 (HOEPA), revises and expands the tests for coverage under HOEPA, and imposes additional restrictions on mortgages that are covered by HOEPA, including a pre-loan counseling requirement. This rule also amends Regulation Z and Regulation X to require, among other things, that lenders provide borrowers information about homeownership counseling providers. BuckleySandler is reviewing these rules and will soon provide additional information.
CFPB and Federal Reserve Board Increase Thresholds for Exempt Consumer Credit and Lease Transactions
On November 20, the CFPB and the Federal Reserve Board announced that, effective January 1, 2013, dollar thresholds in Regulation Z (TILA) and Regulation M (Consumer Leasing Act) for exempt consumer credit and lease transactions will increase to reflect the annual percentage increase in the consumer price index as of June 1, 2012. Transactions at or below the thresholds are subject to the protections of the regulations. Based on the adjustments, the TILA and Consumer Leasing Act protections generally will apply to consumer credit transactions and consumer leases of $53,000 or less in 2013. Mortgage transactions and private student loans remain subject to TILA regardless of the amount of the loan. While the CFPB has rulemaking authority under TILA and the Consumer Leasing Act, the Federal Reserve Board retains authority to issue rules for certain motor vehicle dealers. In addition to the joint adjustment, the CFPB separately adjusted the dollar amount that triggers additional protections for certain home mortgages under the Home Ownership and Equity Protection Act (HOEPA). Consistent with the increase in the consumer price index, the 2013 dollar amount of the HOEPA fee trigger will be $625.
On September 18, the FDIC announced in Financial Institution Letter FIL-39-2012 that it plans to host two teleconferences in the coming weeks to discuss the CFPB’s mortgage-related proposed rules. The teleconferences will be conducted by staff from the FDIC’s Division of Depositor and Consumer Protection and are being offered to officers and employees of FDIC-supervised institutions. The first call will take place on September 27, 2012 and will cover (i) mortgage origination standards, (ii) appraisals for “higher-risk” mortgages, (iii) ECOA appraisal requirements, and (iv) mortgage servicing standards. On October 10, 2012, FDIC staff will discuss (i) RESPA/TILA mortgage disclosure integration, (ii) qualified mortgages and the ability to repay standard, (iii) escrow requirements for “higher-priced mortgage loans”, and (iv) high-cost HOEPA loans.
On August 31, the CFPB extended the comment period for aspects of two recently proposed rules. On July 9, the CFPB proposed a rule to merge the TILA and RESPA mortgage loan disclosures. That proposal includes potential changes to the definition of finance charge, comments on which were due September 7, 2012. Having heard from stakeholders that the proposed definition could impact changes proposed in other CFPB mortgage-related rulemakings, the CFPB extended the comment deadline to November 6, 2012, which matches the deadline for most of the other aspects of the proposed TILA/RESPA disclosure rule. This extension does not impact the September 7, 2012 deadline for comments on whether the CFPB should delay implementation of certain new TILA and RESPA disclosures. Also on July 9, 2012, the CFPB proposed a rule to expand the types of mortgage loans subject to HOEPA, with comments due September 7, 2012. Given the extension of the deadline for comments on the definition of finance charge, which will impact the scope of the extended HOEPA coverage, the CFPB also extended the HOEPA proposed rule comment deadline to November 6, 2012.