CFPB Amends Ability-To-Repay Rule

The CFPB has amended its Ability-to-Repay rule to facilitate access to credit by creating specific exemptions and modifications to the CFPB’s Ability-to-Repay rule for small creditors, community development lenders, and housing stabilization programs.

The CFPB originally finalized its Ability-to-Repay rule on January 10, 2013. The Ability-to-Repay rule established that most new mortgages must comply with basic requirements that protect consumers from taking on loans they do not have the financial means to pay back. Lenders are presumed to have complied with the Ability-to-Repay rule if they issue “Qualified Mortgages,” or QMs.

The current amendments:

  • Exempt certain nonprofit creditors: The final rule exempts from Ability-to-Repay rules certain nonprofit and community-based lenders that work to help low- and moderate-income consumers obtain affordable housing.
  • Facilitate lending by certain small creditors: This amendment makes several adjustments to the Ability-to-Repay rule in order to facilitate lending by small creditors, including community banks and credit unions that have less than $2 billion in assets and each year make 500 or fewer first-lien mortgages, as defined in the rule.
  • Establish how to calculate loan origination compensation: The Dodd-Frank Act mandates that QMs have limited points and fees, and that compensation paid to loan originators, such as loan officers and brokers, is included in points and fees.  The amendment provides certain exceptions to this Dodd-Frank requirement that loan originator compensation be included in the total permissible points and fees for both QMs and high-cost loans.

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