CFPB QM, Ability-to-Repay Rules Are Out, CUNA Provides Summary
It's official. The Consumer Financial Protection Bureau (CFPB) standards to define a "qualified mortgage (QM)" under the agency's "ability to repay" rules are posted to the bureau's website and now may be considered "issued."
As indicated to Credit Union National Association (CUNA) President/CEO Bill Cheney in a Wednesday phone call from CFPB Director Richard Cordray, the CFPB has taken steps to address various CUNA concerns, including legal protection from challenges for noncompliance with qualified mortgage standards.
"We support the agency's steps to minimize disruptions in the availability of mortgage credit for consumers," said CUNA's Cheney Thursday. "CUNA strongly supported a 'safe harbor' approach for QM loans that would provide the maximum legal protection to credit unions under the 'ability-to-repay rule."
Cheney added that the approach taken by the bureau "should provide legal certainty to lenders such as credit unions."
CUNA has created a summary of the final rules with credit union perspective.
Congress directed that the ability-to-repay rules include provisions that would help shield lenders whose loans meet QM standards if challenged in court by a borrower alleging the loan is not in compliance. The new CFPB rules take a dual approach to higher-priced loans and lower-priced ones regarding legal protection.
For lower-priced loans, the CFPB rule creates a "safe harbor" status for lenders. These prime loans generally are made to consumers who are considered to be lower risk borrowers.
It is anticipated that most credit union mortgage loans would qualify for the safe harbor status, an outcome that CUNA has aggressively pursued. Consumers may challenge their loan under the new rule if they feel the loan does not meet the definition of a Qualified Mortgage, but the safe harbor is intended to provide lenders with legal protection that QM standards have been met.
For higher-priced loans, sometimes given to consumers with insufficient or weak credit histories, the CFPB rules would allow a "rebuttable presumption" in legal challenges. A borrower seeking to challenge such a loan will have to prove he or she did not have sufficient income to pay the mortgage and other living expenses.
Additionally, within the last hour, the CFPB has also posted final rules to its website for Home Ownership and Equity Protection Act (HOEPA) "high cost" mortgages and mortgage escrows, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. See News Now Friday for more information on these two rules.
To read the CUNA summary of the rule, click here.