Bureau Releases Modifications and Clarifications to Ability to Repay Rule

The CFPB issued a Final Rule amending the Ability to Repay/Qualified Mortgage Standards. 

The Rule finalizes an additional category of Qualified Mortgages for certain portfolio loans made by Small Creditors; raises the rate spread threshold for certain loans made by Small Creditors to be eligible for the ATR Safe Harbor; and provides a transition period to allow certain creditors to originate balloon-payment qualified mortgages, even if they do not lend primarily in rural or underserved areas.

The Final Rule also makes some revisions to the types of loan originator compensation, which must be included in the points and fees calculation, addressing such compensation paid to an employee.  Certain community development creditors, down payment assistance providers, and nonprofit organizations have also been designated as exempt from the Ability to Repay requirements.  In addition, credit extended through Housing Finance Agency and Emergency Economic Stabilization Act programs are exempt from the Ability to Repay requirements.

We will provide in-depth details in an upcoming newsletter article.

Diane Dean

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