TopMortgage Compliance Update (1)
 

June 6, 2012

 


CFPB: Re-Opening "Ability-to-Repay"


Subscribe-Blue
Newsletter-Blue
 Website-Blue
 Forums-Blue
Twitter-2
Facebook-1
Linkedin-1
Banging Head Let us help!
Isn't it time to bring in the professionals? 
Contact Us-1-Beveled-160

Our Website Forums

LCG-Square-CC-2 (Blue)  

BCG-CC-1  

CFPB Forum-CC-1  

OCC News Forum-CC-(134x134)  

BSA News Forum-Logo  

Mortgage Compliance Forum-Main  

Dodd-Frank Forum-CC-1  

NMLS Users Forum-CC-1  

FHA Forum-CC-1  

Veterans Mortgage Forum-Main  

516-442-3456  

Home-Website-LCG(160x27)-1
Compliance-Website-LCG(160x27)-1
Presentations-Website-LCG(160x27)-1
About Us-Website-LCG(160x27)-1
Clientele-Website-LCG(160x27)-1
Articles-Website-LCG(160x27)-1
Newsletters-Website-LCG(160x27)-1
Library-Website-LCG(160x27)-1
Contact Us-Website-LCG(160x27)-1
Greetings! 

On June 5, 2012, the Consumer Financial Protection Bureau (Bureau) announced that it is "reopening the comment period" for the proposed rule, issued on May 11, 2011 by the Federal Reserve Board (Board), addressing the new ability-to-repay requirements that generally will apply to consumer credit transactions secured by a dwelling and the definition of a "qualified mortgage."

The ability-to-repay requirements were set forth in the May 11, 2011 proposal to amend Regulation Z (the implementing regulation of the Truth in Lending Act (TILA) to implement amendments to TILA made by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

Since then, pursuant to Dodd-Frank, the Board's rulemaking authority for TILA was transferred to the Bureau as of July 21, 2011. The original comment period to the proposed rule closed on July 22, 2011.

The Bureau is reopening the comment period until July 9, 2012 to seek comment specifically on certain new data and information submitted during or obtained after the close of the original comment period.

I have written extensively about the ability-to-repay. And I would urge you to read some of these articles to become familiar with these important requirements:

Ability-to-Repay: Regulating or Underwriting? Part I

Ability-to-Repay: Regulating or Underwriting? Part II

Ability-to-Repay: The Basics and a Chart

Ability-to-Repay: The Chart

Ability-to-Repay: Additional Analysis

FRB: Proposes Rule - Ability-to-Repay

Best wishes,
Jonathan Foxx
President & Managing Director
 Back
 In This Newsletter-1 
Read More-1
Questions and Comments
Litigation and Liability
Foreclosure
Outcomes from Litigation
Factors or Costs
  
Sections 1411, 1412, and 1414 of the Dodd-Frank created new TILA section 129C, which, among other things, established new ability-to-pay requirements. If a mortgage is a so-called "qualified mortgage," the compliance with the ability-to-repay rule would offer a presumption of compliance.

The word 'presumption' is a dispositive word in this proposal. Please keep the phrase "presumption of compliance" in mind as you read through this brief outline.

On May 11, 2011, the Board published for notice and comment a proposed ability-to-repay rule, amending Regulation Z to implement new TILA section 129C. The comment period for this initial proposal closed on July 22, 2011.

Then, on July 21, 2011 Dodd-Frank transferred the Board's rulemaking authority for TILA, among other consumer financial protection laws, to the Bureau. Accordingly, all comment letters on the proposed rule were also transferred to the Bureau. According to the Bureau, in response to the proposed rule approximately 1800 comment letters were received from numerous commenters, including members of Congress, lenders, consumer groups, trade associations, mortgage and real estate market participants, and individual consumers.

Even after the comment period closed, various interested parties, including industry and consumer group commenters, submitted to the Bureau oral and written ex parte presentations on the proposed rule.

Through various comment letters, ex parte communications, and the Bureau's own collection of data, the Bureau has received additional information and new data pertaining to the proposed rule.

The Bureau is now interested in providing opportunity for additional public comment on these materials. Thus, it is reopening the comment period until July 9, 2012, in order to request comments specifically on certain additional information or new data, but not other aspects of the proposed rule already submitted previously.

So, what are the new data?
 BACK 
The Bureau now seeks comment on mortgage loan data that the Bureau has received from the Federal Housing Finance Agency (FHFA). To date, the Bureau has received a sample drawn from the FHFA's Historical Loan Performance (HLP) data along with tabulations from the entire file.

The data include a one percent random sample of all mortgage loans in the HLP data from 1997 through 2011. Tabulations of the HLP data by the FHFA show the number of loans and performance of those loans by year and debt-to-income (DTI) range.

The HLP data consists of all mortgage loans purchased or guaranteed by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (jointly, the GSEs), but does not include loans backing private-label mortgage-backed securities (MBS) bought by the GSEs.

The data contains loan-level information on characteristics and performance of all single-family mortgages purchased or guaranteed by the GSEs. FHFA updates the HLP data quarterly with information from each GSE.

Among other elements, the data includes product type; payment-to-income and debt-to-income (PTI/DTI) ratios at origination; initial loan-to-value (LTV) ratios based on the purchase price or appraised property value and the first-lien balance; and credit scores.

The Bureau proposes to use these data to tabulate volumes and performance of loans with varying characteristics and to perform other statistical analyses that may assist the Bureau in defining loans with characteristics that make it appropriate to presume that the lender complied with the ability-to-pay requirements or assist the Bureau in assessing the benefits and costs to consumers, including access to credit, and covered persons of, as well as the market share covered by, alternative definitions of a "qualified mortgage."

For example, the Bureau is going to examine various measures of delinquency and their relationship to other variables, such as a consumer's total DTI ratio. Specifically, the Bureau obviously believes that loan performance, as measured by delinquency rate such as 60 days or more delinquent, is an appropriate metric to evaluate whether consumers had the ability to repay those loans at the time made.

Excluding loans for investor-owned properties, low-or no-document mortgages, interest-only (IO) mortgages, negatively-amortizing mortgages (such as payment option-ARMs), or mortgages with a balloon payment feature, the Bureau notes that specific tabulations include first-lien mortgages for first or second homes, that have fully documented income and that are fully amortizing with a maturity that does not exceed 30 years.
 BACK 
  Professional AssistanceLCG 
Contact Us-2
 BACK 
LibraryLibrary
Law Library Image
Consumer Financial Protection Bureau

Notice of Reopening of Comment Period
and Request for Comment
Truth in Lending (Regulation Z)

Federal Register
June 5, 2012
 BACK 
Suite of ServicesSuite
LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the United States specializing exclusively in outsourced mortgage compliance and offering a full suite of services in residential mortgage banking for banks and non-banks.

Pioneers in outsourcing solutions for mortgage compliance. 
 
 

Professional guidance and support to financial institutions!  

Mortgage Compliance
CFPB Examination Preparation
Anti-Money Laundering Compliance
Legal and Regulatory Compliance
State Banking Examinations
HUD/FHA Examinations
Loan Originator Compensation
Licensing Compliance
HMDA/CRA and Fair Lending
Information Technology & Security
Training and Education
Quality Control
Prefunding Fannie LQI Audits
Platform Development
Retail and Wholesale Compliance
Correspondent Compliance
Servicer Compliance
Affiliates Compliance (RESPA)
Business Development
Advertising Compliance
Loss Mitigation Strategies
Forensic Mortgage Services
Sarbanes-Oxley Compliance (Part 404)
Audit and Due Diligence Reviews
Regulatory and Sales Training
Portfolio Risk Management
Credit Risk Management
Loan Analytics Audits
Compliance Audits
Policies and Procedures
Due Diligence Reviews
Portfolio Purchase Audits
GSE Applications
Ginnie Mae Applications

This communication is sent to our valued clients and colleagues, who regularly receive our Mortgage Compliance Updates, Compliance Alerts, Commentaries, and related publications.

These publications are free to subscribers. Information contained herein is not intended to be and is not a source of legal advice.

� 2006-2012 Lenders Compliance Group, Inc. All Rights Reserved.