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Thursday, September 19, 2013

CFPB Finalizes Revisions to Mortgage Rules

The Consumer Financial Protection Bureau (CFPB) last Friday approved several final revisions to the mortgage rules taking effect in January. The changes include provisions related to thresholds for points and fees and servicing, financing credit insurance premiums, loan origination and rural and underserved areas.

The final rule clarifies that monthly insurance premium structures are not covered by the loan originator compensation rule’s ban on financed premiums. ABIA had objected to language in the preamble of the original rule suggesting that pay-as-you-go premiums were covered, and they were instrumental in persuading the bureau to adopt this fix.

The rule also makes clarifications about financing of credit insurance premiums. The final rule provides that credit insurance premiums are “financed” by a creditor when the creditor allows the consumer to defer payment of the premium past the month in which it is due. This would include debt cancellation and debt suspension agreements. The prohibition also applies to “level” or “levelized” premiums, where the monthly premium is the same each month rather than decreasing along with the loan balance.

In addition, the rule also extends to all small creditors -- regardless of whether they operate in a predominantly “rural” or “underserved” area -- the exemption from the ban on high-cost mortgages featuring balloon payments, so long as the loans meet certain restrictions.

Similarly, the rule makes it easier for certain small creditors to continue qualifying for an exemption from a requirement to maintain escrows on certain higher-priced mortgage loans. These expanded exemptions will remain in place while the bureau re-examines the underlying definitions of “rural” or “underserved” over the next two years.

Read the final rule.