CFPB finalizes amendments to mortgage rules

by Ballard Spahr LLP

The CFPB has issued a final rule amending certain provisions of the 2013 Title XIV final mortgage rules. While in its press release the CFPB describes the amendments as “minor adjustments to its mortgage rules,” the final rule contains several major changes from the CFPB’s proposal.

QM Points and Fees Cure. Generally, to be considered a qualified mortgage (QM), a mortgage loan must not contain points and fees that exceed three percent (3%) of the loan if the principal is $100,000 or more. The final rule addresses the scenario when a lender discovers post-consummation that a loan it originated is not a QM because the points and fees exceeded the 3% (or other applicable) cap.

As proposed, the rule creates a procedure permitting the lender to refund the overage amount of points and fees to the borrower within 210 days of consummation and keep the loan’s QM status. However, while allowing a longer cure period than the proposal’s 120 day period, the final rule only allows a cure for loans consummated on or after the final rule’s effective date and on or before the sunset date of January 10, 2021. Also unlike the proposal, the final rule includes events that cut off the ability to cure. The cure is only available prior to the occurrence of any of the following events: (1) the consumer’s institution of an action in connection with the loan; (2) the creditor, assignee or servicer receiving written notice from the consumer that the loan’s points and fees exceed the applicable limit, or (3) the consumer becoming 60 days past due. And in another significant change from the proposal, the final rule requires the lender to pay interest on the points and fees overage at the contract rate applicable during the period from consummation until payment is made to the consumer.

The final rule includes a requirement for the lender to maintain and follow policies and procedures for “post-consummation review of points and fees” (but expressly does not require a full loan review as some commenters thought the proposal would have mandated). However, the final rule does not include the CFPB’s proposed requirement that the lender must have originated the mortgage loan in good faith as a QM.

Alternative Small Servicer Definition. Under the RESPA-TILA mortgage servicing rules, “small servicers” (as defined by the servicing rules) are exempt from certain provisions of the rules if they service 5,000 or fewer mortgage loans annually and meet other requirements. The CFPB proposed an alternative definition of a small servicer to address concerns that nonprofits that receive fees to service loans for other associated nonprofits might not be able to qualify for the small servicer exemption. As proposed, the final rule expands the definition of a small servicer to include a nonprofit entity that services 5,000 or fewer mortgage loans, including any mortgage loans services on behalf of associated nonprofit entities, for all of which the servicer or an associated nonprofit is the creditor.

Nonprofit Lender Exemption from ATR Provisions. The ability-to-repay (ATR) rule exempts certain nonprofits that make mortgage loans to low or moderate income borrowers from certain provisions of the rule if they make no more than 200 dwelling-secured loans per year and meet other specific requirements. As proposed, the final rule amends the exemption so that subordinate lien loans for down payment assistance and certain other purposes that are interest-free, forgivable, and meet certain other conditions (so-called “soft seconds”) would not count toward the annual 200 loan limit.

Effective Date.  Except for a commentary revision dealing with the relationship between the QM cure and the RESPA/Regulation X tolerance cure under the TILA-RESPA integrated disclosure rule that becomes effective next year, the final rule becomes effective upon its publication in the Federal Register. Under Regulation X, if any charges at settlement exceed the charges listed in the good faith estimate by more than the permitted tolerance, the lender can cure the tolerance violation by reimbursing the amount by which the tolerance was exceeded on or within 30 calendar days after settlement. The final rule adds a comment that provides that amounts paid to a consumer pursuant to the QM cure can be offset by amounts paid to the consumer pursuant to the RESPA/Regulation X tolerance cure to the extent the amount paid to cure the tolerance violation is being applied to points and fees. Effective August 1, 2015, to coincide with the effective date of the CFPB’s final rule integrating the TILA and RESPA application and closing disclosures, that comment will be replaced with a substantially similar new comment that references the tolerance cure provision in the TILA-RESPA integrated disclosure rule.

Unaddressed Issues. In its proposal, the CFPB requested comments on two additional issues: (1) whether and how to provide for a cure provision for QM loans that inadvertently exceed the 43% debt-to-income ratio required under the ATR rule; and (2) the credit extension limit applicable to the small creditor exemption under various Dodd-Frank rules. The final rule does not address these issues. In the final rule’s supplementary information, the CFPB states that it is considering comments submitted on these issues and whether to address them in a future rulemaking.

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.

© Ballard Spahr LLP | Attorney Advertising

Written by:

Ballard Spahr LLP

Ballard Spahr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.