WASHINGTON (8/14/12)--Key concerns about the Consumer Financial Protection Bureau's (CFPB) Ability-to-Repay Regulation Z proposal were the subject of a Monday meeting in Washington.
Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn, Senior Assistant General Counsel Jared Ihrig and Regulatory Counsel Dennis Tsang attended the Monday CFPB meeting in Washington. CUNA has met several times with agency officials to discuss the ability-to-repay proposal, which would define a "qualified mortgage."
Under the still developing ability-to-repay rule, mortgage originators would be required to consider a homebuyer's ability to repay the loan before a loan could be offered.
Dunn said one area of critical concern is how the agency should implement a provision in the Dodd-Frank Wall Street Reform Act that directs the CFPB to establish a "safe harbor" or "rebuttable presumption of compliance." The agency can only include one of the approaches in the final rule, she noted.
Based on how courts have treated safe harbors in the past, this approach would afford mortgage loan originators that follow the CFPB's qualified mortgage requirements certain protections from litigation. That is because, in general, under the safe harbor approach, the court would be confined to looking at whether the qualified mortgage requirements were met, Dunn said.
Dunn noted that the "rebuttable presumption" approach would provide more flexibility for consumers to sue lenders and allow them to assert their inability to repay a mortgage loan as an affirmative defense in a foreclosure proceeding. Lenders challenged in court would generally have the burden of proving they met the qualified mortgage standards, under the rebuttable presumption approach.
CUNA will continue advocating for the safe harbor approach, Dunn said. The final rule is not expected to be released until after this November's election, and must be in place by Jan. 21, 2013.
CUNA anticipates further discussions on the proposal.