CFPB publishes annual CARD Act, HOEPA and QM adjustments

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The CFPB has published a final rule regarding various annual adjustments it is required to make under provisions of Regulation Z (TILA) that implement the CARD Act, HOEPA, and the ability to repay/qualified mortgage provisions of Dodd-Frank. The adjustments made by the final rule are effective January 1, 2015.

The CARD Act requires the CFPB to calculate annual adjustments of (1) the minimum interest charge threshold that triggers disclosure of the minimum interest charge in credit card applications, solicitations and account opening disclosures, and (2) the fee thresholds for the penalty fees safe harbor. The calculation did not result in a change to the current $1.00 minimum interest charge threshold. However, in the final rule, the CFPB increased the current penalty fee safe harbor of $26 for a first late payment and $37 for a subsequent violation within the following six months to, respectively, $27 and $38.

HOEPA requires the CFPB to annually adjust the total loan amount threshold that determines whether a transaction is a high cost mortgage when the points and fees are either 5 percent or 8 percent of such amount. In the final rule, the CFPB increased the current dollar thresholds from, respectively, $20,000 to $20,391, and $1,000 to $1,020.

Pursuant to its ability to repay/QM rule, the CFPB must annually adjust the points and fees limits that a loan must not exceed to satisfy the requirements for a QM. The CFPB must also annually adjust the related loan amount limits. In the final rule, the CFPB increased these limits to the following:

  • For a loan amount greater than or equal to $101,953 (currently $100,00), points and fees may not exceed 3 percent of the total loan amount
  • For a loan amount greater than or equal to $61,172 (currently $60,000) but less than $101,953 (currently $100,000), points and fees may not exceed $3,059 (currently $3,000)
  • For a loan amount greater than or equal to $20,391 (currently $20,000) but less than $61,172 (currently $60,000), points and fees may not exceed 5 percent of the total loan amount
  • For a loan amount greater than or equal to $12,744 (currently $12,500) but less than $20,391 (currently $20,000), points and fees may not exceed $1,020 (currently $1,000)
  • For a loan amount less than $12,744 (currently $12,500), points and fees may not exceed 8 percent of the total loan amount

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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