Presentation handout for the Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z) presentation.
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Read articles below for analysis and discussion of recent trends by BM&G’s industry experts.
CFPB Releases Exam Procedures for New Mortgage Rules
This memorandum is to advise you of the Consumer Financial Protection Bureau’s June 4, 2013, press release notifying the mortgage lending industry of updated exam procedures for the mortgage rules issued in January 2013. A redacted text of the CFPB press release is reprinted below for your information and use:
CFPB Delays Effective Date of the Regulation Z Prohibition on Financing Single-premium Credit Insurance to January 10, 2014
For certain consumer credit transactions for which a creditor receives an application on or after June 1, 2013, the Consumer Financial Protection Bureau (CFPB) amended Regulation Z by adding Section 1026.36 (i) prohibiting the financing of single-premium credit insurance (see our memorandum dated April 10, 2013). The effective date of Section 1026.36(i) was scheduled to be June 1, 2013, but the CFPB by final rule issued today has delayed its effective date until January 10, 2014. The text of Section 1026.36(i) is reprinted below:
Uniform State Test for State-Licensed Mortgage Loan Originators
On May 20, 2013, the Consumer Financial Protection Bureau (CFPB) issued its Bulletin 2013-05 as guidance for the Uniform State Test for State-Licensed Mortgage Loan Originators developed by the Nationwide Mortgage Licensing System and Registry. The text of Bulletin 2013-05 is reprinted below:
CFPB Proposed Rule to Delay Effective Date of Prohibition on Financing Single-premium Credit Insurance (§1026.36(i) of Regulation Z)
In the May 10, 2013 issue of the Federal Register (Vol. 78 No. 91), click here, the Consumer Financial Protection Bureau (CFPB) published a proposed rule proposing to temporarily delay the June 1, 2013, effective date of a prohibition on creditors financing credit insurance premiums in connection with certain consumer credit transactions secured by a dwelling (i.e., §1026.36(i) of Regulation Z). (See our memorandum dated April 10, 2013) The prohibition was adopted in the Loan Originator Compensation Requirements under the Truth in Lending Act (Regulation Z) Final Rule, issued on February 15, 2013.
CFPB Amends Regulation B to Require Providing Copies of Appraisals to Loan Applicants
In the January 31, 2013 Federal Register (78 FR 7248), the Bureau of Consumer Financial Protection (CFPB) issued a final rule (the Appraisal Rule) that amends §1002.14 of Regulation B, the Form C-9 Notice, and the Official Interpretations to §1002.14 to require creditors to provide free copies of all written appraisals and other written valuations developed in connection with an application for a loan that is to be secured by a first lien on a dwelling. The Appraisal Rule also requires creditors to notify applicants in writing of the right to receive a copy of each written appraisal at no additional cost. The Appraisal Rule is effective January 18, 2014, and applies to loans to be secured by first liens on dwellings for which the creditor receives an application on or after January 18, 2014.
CFPB Issues Final Rule to Establish Consumer Financial Civil Penalty Fund
In the May 7, 2013 issue of the Federal Register (78 FR 26489), the Bureau of Consumer Financial Protection (CFPB), issued a final rule that establishes a Consumer Financial Civil Penalty Fund (Civil Penalty Fund) into which the CFPB will deposit any civil penalty it obtains against any person in any judicial or administrative action under Federal consumer financial laws. Funds in the Civil Penalty Fund may be used for payments to the victims of activities for which civil penalties have been imposed under Federal consumer financial laws. In addition, to the extent that such victims cannot be located or such payments are otherwise not practicable, the CFPB may use funds in the Civil Penalty Fund for the purpose of consumer education and financial literacy programs. This final rule implements the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act for the Civil Penalty Fund. It gives the CFPB’s interpretation of what kinds of payments to victims are appropriate and establishes procedures for allocating funds for such payments to victims and for consumer education and financial literacy programs.
CFPB Proposed Amendments to Final Rules Published January 2013
In the May 2, 2013 issue of the Federal Register (Vol. 78 No. 85), click here, the Consumer Financial Protection Bureau (CFPB) published a proposed rule to amend the following Final Rules issued by the CFPB in January 2013: 1. Ability-to-Repay and Qualified Mortgage Standards Under the Truth in Lending Act (78 FR 6407, January 30, 2013).
Disparate Impact Final Rule Issued by HUD (Vol. 78 FR No. 32)
The Fair Housing Act (42 U.S.C. 3601 et seq.) prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities on the basis of race, color, religion, sex, disability, familial status, or national origin. The Department of Housing and Urban Development (HUD) is statutorily charged with the authority and responsibility for interpreting and enforcing the Fair Housing Act and with the power to make rules implementing the Act. The Act does not specify a standard for proving a discriminatory effect (i.e., disparate impact) violation. Notwithstanding this statutory omission, HUD and the eleven federal appellate courts that have ruled on this issue agree that practices with unjustified discriminatory effects violate the Act, although there is some minor variation in the application of the discriminatory effect standard.
Mortgage Credit Certificate Program
In today’s issue of the Texas Register (Vol. 38 No.18) the Texas Department of Housing and Community Affairs published the following notice to all interested mortgage lenders: “The Texas Department of Housing and Community Affairs (the “Department”) intends to implement a Mortgage Credit Certificate Program (the “Program”) to assist eligible very low, low, and moderate income first-time homebuyers with the purchase of a residence located within the State of Texas.