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With CFPB tweak, lenders could refund some fees, points for QM rating
WASHINGTON (5/1/14)--Minor mortgage rule adjustments proposed by the Consumer Financial Protection Bureau would allow credit unions and other institutions to refund excess points and fees that are charged on mortgages in certain cases.
 
The proposed changes would set limited circumstances where lenders that exceed a points and fees cap can refund the excess amount to consumers and still have the loan be considered a Qualified Mortgage, the CFPB said.
 
CFPB Director Richard Cordray said the proposal would maintain strong consumer protections set by the agency while making tweaks to ensure consumers have access to credit. "This includes helping nonprofits that provide working families with important pathways to affordable homeownership," he added.
 
The CFPB in a release said the proposal also:
  • Offers an alternative definition of a small servicer that would allow certain nonprofits to continue to consolidate their servicing activities while maintaining their exemption from some servicing rules; and
  • Allow certain nonprofits to continue to extend certain interest-free, forgivable loans, also known as "soft seconds," without regard to the 200-mortgage loan limit.
While the CFPB's points and fees proposed "cure" provision would affect credit unions, the remaining two portions of the proposal noted above will not, as they are not 501(c)(3) organizations.  However, the Credit Union National Association will be urging the bureau to consider expanding the scope of these two provisions to other nonprofit creditors, such as credit unions.
 
The CFPB is also seeking:
  • Comment on a possible limited, post-closing cure or correction provision for loans that are originated with the good faith expectation of QM status, but that actually exceed the 43% debt-to-income ratio limit that applies to certain QMs; and
  • Feedback and data from smaller creditors such as credit unions regarding implementation of certain provisions of the 2013 mortgage rules that are tailored to account for small creditor operations and how their mortgage origination activities have changed in light of the new rules.
Specifically, the CFPB is seeking comment on amending the credit extension limits under the "small creditor" provisions of the Ability-to-Repay/Qualified Mortgage rule.  CUNA will be weighing in on this aspect of the proposal to urge the Bureau to expand the number of first lien mortgages allowed to be originated by small creditors and recommending other changes, as well.
 
"We appreciate that the bureau is reviewing and proposing these amendments to the mortgage rules, taking into consideration the operational concerns and needs of small creditors, such as credit unions; however, we will be urging the agency to do more to exempt credit unions from these and other rules," CUNA Associate General Counsel Jared Ihrig said Wednesday.
 
CUNA will work with credit union leagues, its Consumer Protection Subcommittee and other groups to analyze the proposed changes and prepare comments for the CFPB, he added.
 
For the full CFPB release, use the resource link.
Other Resources

CFPB Release
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