Final Rules Allows QM “Cure”

The CFPB has issued a Final Rule that allows a creditor (or assignee) to “cure” a loan into Qualified Mortgage (QM) status after closing when points and fees exceed QM limits. Creditors or assignees would be allowed to provide a refund to “cure” the loan, if other QM requirements have been met.

The following requirements must also be met:

  • Set policies and procedures are followed for reviewing points and fees after closing and for providing refunds.
  • Refunds are made within 210 days after closing and prior to:
    • Institution of any action by the consumer in connection with the loan;
    • Receipt of a written notice from the consumer that the points and fees exceeded any QM limit; or,
    • The obligation being 60 days past due.

The “cure” amount must be at least equal to the sum of the excess points and fees and any interest accrued on that amount.

There were also some changes made to definitions and exemptions for nonprofit entities. The changes will allow a nonprofit entity that services loans for an associated organization to potentially still qualify as a small servicer. Also, nonprofit entities looking to be exempt from the Ability to Repay (ATR) requirements do not need to count certain interest-free, contingent, subordinate lien loans towards the credit extension limit.

The Final Rule generally became effective upon publication in the Federal Register on November 3, 2014. The cure allowance will only be available for loans closed on or after November 3, 2014 through January 10, 2021.

Diane Dean

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