Few would dispute that the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act or Act) has fundamentally altered the residential mortgage industry. Although the Act was passed just over three years ago, one of the most significant decisions regarding the full impact of the Dodd-Frank Act came when the Bureau of Consumer Financial Protection (CFPB) announced its final Ability-to-Repay rule on January 10, 2013. The CFPB had long been considering two alternative definitions to the term “qualified mortgage.” The disparate alternatives to the ambiguity created by the Dodd-Frank Act presented enormous implications on the ability of creditors to remain in the mortgage lending industry as well as the ability of consumers to secure affordable mortgage products. This article will discuss the final rule issued by the CFPB.

The Dodd-Frank Act, which amended the Truth in Lending Act (TILA), prohibits a creditor from originating a residential mortgage loan without considering the ability of the consumer to repay the loan. Unfortunately, the Dodd-Frank Act’s clarity on this requirement seems to end there. The Dodd-Frank Act allows creditors to originate a “qualified mortgage,” but the language of the statute reveals an ambiguity as to whether Congress intended such a "qualified mortgage" to constitute a legal safe harbor under the ability-to-repay requirement or a rebuttable presumption of compliance. In fact, the relevant section heading under the Dodd-Frank Act is titled "Safe Harbor and Rebuttable Presumption.”