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Thursday, April 11, 2013

Groups Ask CFPB for Mortgage Rule Clarifications, Extensions

ABA and three other trade groups yesterday urged the Consumer Financial Protection Bureau (CFPB) to quickly publish much-needed clarifications on its new mortgage-related rules (qualified mortgage rules or QM) and to extend the rules’ compliance deadlines.

The trade groups emphasized in a letter to bureau Director Richard Cordray that they are repeating their urgent request that the CFPB use its exemption authority to extend the QM rules’ compliance deadline from 12 months to 18 or 24 months.

The ABIA's interest in the QM rule focuses more narrowly on its effects on distribution of insurance products to bank customers by affiliated entities. The three main impacts on banks that sell insurance will be in the distribution of title insurance, homeowners and lender-paced insurance (LPI). For title insurance, because the CFPB’s rule states that a mortgage loan cannot qualify as a QM loan if the associated points and fees exceed 3 percent of the loan amount and that fees charged for title insurance by a company affiliated with a lender must be included in the calculation of points and fees, loans made by banks affiliated with title insurance brokers may fail to qualify as a QM loan. This is also true of Homeowners coverage.

For LPI, the CFPB’s QM rule states that the servicer notify a borrower twice before charging the borrower for LPI – first at least 45 days before the servicer imposes a charge on the borrower, and at least 15 days before the servicer imposes a charge on the borrower; the second of these notices has to provide the borrower with a good-faith estimate of how much the LPI would cost; the servicer must terminate the insurance within 15 days of receiving evidence that the borrower has the necessary insurance and refund the LPI premiums to the borrower for any periods of overlapping coverage; and, where the borrower has an escrow account for the payment of the homeowner’s insurance premiums, the servicer is prohibited from obtaining force-place insurance where the servicer can continue the borrower’s insurance, even if the servicer needs to advance funds to the borrower’s escrow account to do so.

Read the letter.