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Monday, April 22, 2013

CFPB Issues Proposed Rules on QM & Ability to Repay

Provided by: ABIA Outside Counsel Chrys Lemon and Adam Maarec, McIntyre & Lemon, PLLC

The Consumer Financial Protection Bureau (CFPB) proposed a rule on Friday April 19, 2013 that seeks to amend the "ability to repay" (qualified mortgage/QM) and mortgage servicing rules. Two provisions may affect bank-owned insurance agencies and their affiliates.

First, the CFPB seeks to amend its rules to clearly state that they do not "occupy the field of regulation of the practices covered by [the Real Estate Settlement and Procedures Act (RESPA)] or Regulation X." Since the CFPB's mortgage servicing rules governing lender-placed insurance were enacted under its RESPA authority, this clarifies the applicability of state laws that go beyond the CFPB's rules.

Second, the CFPB seeks to clarify the scope of the small servicer exemption from its mortgage servicing rules. Currently, a "small servicer" with 5,000 or fewer loans is generally exempt from the mortgage servicing rule. This proposal would expand that definition by clarifying that loans serviced by affiliates of a servicer count towards the 5,000 loan limit, and that the servicer must currently own or have originated the mortgages.

The proposal would also clarify how the debt-to-income ratio is calculated for qualified mortgages. Comments are due 30 days after the proposal is published in the Federal Register, which has not occurred yet.

Read the proposal.