In mid-January, the Consumer Financial Protection Bureau (CFPB) opened the floodgates, and mortgage lending rules began gushing out.
In one day, the CFPB issued an ability-to-repay final rule, an ability-to-repay proposed rule, a mortgage escrow final rule, and high-cost mortgage lending and home ownership counseling final rules.
The following week, the bureau issued a variety of mortgage servicing rules, a mortgage loan originator (MLO) compensation rule, an appraisal rule, and—in conjunction with five other federal agencies—another appraisal rule. The regulatory flood was due to provisions in the Dodd-Frank Act of 2010 that required the
CFPB to issue most mortgage-related regulations by January 2013, with an effective date within 12 months.
CFPB Director Richard Cordray has said repeatedly the bureau recognizes credit unions weren’t the cause of the financial crisis, and CUNA lobbied the agency with some notable success to consider exemptions for credit unions from the new mortgage lending requirements.
Still, a number of requirements will affect credit unions’ mortgage lending programs.
It’s difficult to compress the CFPB’s mortgage lending regulations into a simple but comprehensive summary. But this overview will help you begin to assess the regulations’ impact on your operations.
Six points to know
The new “ability-to-repay” rules, nine new mortgage servicing requirements, and the mortgage loan origination rule are effective Jan. 10, 2014. The new appraisal rules are effective Jan. 18, 2014.
Those three provisions are:
The new escrow rule extends the minimum period to maintain a mandatory escrow account for a firstlien “higher-priced mortgage” from the previously required one year to five years. (In very general terms, a “higher-priced mortgage” is a closed-end loan secured by the borrower’s primary residence with an APR that’s 1.5+% over the “prime offer rate” for a first lien and 3.5+% for a subordinate lien.)
The CFPB exempts from this escrow requirement any credit union with less than $2 billion in assets that operates predominantly in a rural or underserved area, that originated 500 or fewer first-lien mortgages during the preceding year, and that does not typically hold escrow accounts.
The new regulation on mortgage loan originator (MLO) standards (see No. 5) includes a provision that prohibits the inclusion of mandatory arbitration clauses in closed-end loans secured by the consumer’s “dwelling” and in home equity lines of credit (HELOC) secured by the consumer’s principal dwelling.
A dwelling includes a one- to four-unit residential structure, condominium or cooperative unit; and a mobile home or a trailer used as a residence.
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