By: Zach Smith
On September 13, the Consumer Financial Protection Bureau (CFPB) announced final amendments to the mortgage rules that it issued earlier this year. The CFPB first issued the final mortgage rules in January 2013 and then released subsequent amendments in June. The final amendments also make some additional clarifications and revisions in response to concerns raised by stakeholders.
The final modifications announced by the CFPB in September include:
- Amending the prohibition on certain servicing activities during the first 120 days of a delinquency to allow the delivery of certain notices required under state law that may provide beneficial information about legal aid, counseling, or other resources.
- Detailing the procedures that servicers should follow when they fail to identify or inform a borrower about missing information from loss mitigation applications, as well as revisions to simplify the offer of short-term forbearance plans to borrowers suffering temporary hardships.
- Clarifying best practices for informing borrowers about the address for error resolution documents.
- Exempting all small creditors, including those not operating predominantly in rural or underserved areas, from the ban on high-cost mortgages featuring balloon payments. This exemption will continue for the next two years while the CFPB re-examines the definitions of “rural” and “underserved.”
- Explaining the “financing” of credit insurance premiums to make clear that premiums are considered to be “financed” when a lender allows payments to be deferred past the month in which it’s due.
- Clarifying the circumstances when a bank’s teller or other administrative staff is considered to be a “loan originator” and the instances when manufactured housing employees may be classified as an originator under the rules.
- Clarifying and revising the definition of points and fees for purposes of the qualified mortgage cap on points and fees and the high-cost mortgage points and fees threshold.
- Revising effective dates of many loan originator compensation rules from January 10, 2014 to January 1, 2014.
While the industry continues to advocate for an extension of the effective date to provide additional time to implement the necessary compliance requirements, the CFPB insists that both lenders and mortgage servicers have had ample time to comply with the rules. Most recently, in testimony before the House Financial Services Committee, CFPB Director Richard Cordray stated that “most of the institutions have told us that they will be in compliance” and he didn’t foresee further delays.
Related Research
Experian’s Global Consulting Practice released a recent white paper, CCAR: Getting to the Real Objective, that suggests how banks, reviewers and examiners can best actively manage CCAR’s objectives with a clear dual strategy that includes both short-term and longer-term goals for stress-testing, modeling and system improvements. Download the paper to understand how CCAR is not a redundant set of regulatory compliance exercices; its effects on risk management include some demanding paradigm shifts from traditional approaches. The paper also reviews the macroeconomic facts around the Great Recession revealing some useful insights for bank extreme-risk scenario development, econometric modeling and stress simulations.
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