Summary

On October 22, 2014, the CFPB announced that it would permit refunds of excessive fees (with interest) within 210 days after loan closing for qualified mortgages. The provision expires in January 2021 and requires lenders to adopt procedures for monitoring the points and fees charged.

The CFPB’s qualified mortgage standards require that the points and fees on so-called “qualified mortgages” be capped at 3 percent, but there was no vehicle in the rules enacted in January of this year for a refund of fees exceeding the cap. Qualified mortgages have a maximum 43 percent debt-to-income ratio and restrict balloon payments and alternative interest rate loans. So-called qualified mortgages are generally free from the CFPB’s ability to repay rules and protect against borrower lawsuits. However, there was no mechanism in the rule for refunds on points and fees in excess of the cap that would jeopardize the loan’s status as a qualified mortgage.

On October 22, 2014, the CFPB announced that it would permit refunds of excessive fees (with interest) within 210 days after loan closing. The provision expires in January 2021 and requires lenders to adopt procedures for monitoring the points and fees charged. “The change is designed to encourage lenders to provide access to credit to consumers seeking loans that are at or near the points and fees limit,” the CFPB said. The American Bankers Association claims that this new provision should alleviate problems that the cap presents in smaller mortgages that “trap” people when the fees are more than the cap.