An official website of the United States Government Español

Mortgages

Clarification of the 2013 Escrows Final Rule

By

Today, we issued a final rule clarifying and making technical amendments to the 2013 Escrows Final Rule issued by the Bureau this past January. This is the first final rule in connection with our planned issuances to clarify and provide additional guidance about the mortgage rules we issued in January. It is based on a proposed rule issued in April.

This final rule has two primary purposes:

Maintaining Consumer Protections
The 2013 Escrows Final Rule amends an existing rule that provides protections regarding assessments of consumers’ ability to repay and prepayment penalties on certain “higher-priced” mortgage loans. The Dodd-Frank Act and certain of the other new mortgage rules we issued in January expand and strengthen the requirements concerning ability to repay and prepayment penalties. However, the 2013 Escrows Final Rule as adopted in January can be read to cut off the old protections before the new expanded protections take effect. This would create a six-month period when those consumer protections would not apply. This final rule establishes a temporary provision to ensure existing protections remain in place for higher-priced mortgage loans until the expanded provisions take effect in January 2014.

“Rural” and “Underserved” Definitions
We are also clarifying how to determine whether or not a county is considered “rural” or “underserved” for purposes of applying an exemption in the 2013 Escrows Final Rule and special provisions adopted in three other Dodd-Frank Act mortgage rules we issued in January. We also provide illustrations of how to do the determinations to facilitate compliance. The determinations are made based on currently applicable Urban Influence Codes or UICs, which are established by the USDA’s Economic Research Service (for “rural”), or based on HMDA data (for “underserved”). We used the changes to compile the final 2013 rural or underserved counties list (which applies with respect to the exemption in the 2013 Escrows Final Rule posted on our website to mortgages closed from June 1, 2013 through December 31, 2013.)

During the rulemaking process for these clarifications, the Bureau received many comments suggesting major changes to the rural and underserved definitions and related provisions. These comments were outside the scope of the narrow technical changes the rule was proposing. However, the Bureau plans to finalize very soon the proposed rule the Bureau issued concurrently with the Ability to Repay/QM Rule in January, and it will address questions of further flexibility for small institutions.

We have also recently issued a proposed rule with clarifications and updates to the ATR/QM and Servicing rules from January. We plan to issue a final rule based on that proposal in June. Also in June, we plan to issue additional proposed clarifications and guidance about the new mortgage rules. Periodic updates will continue to be made on an as-needed basis. They will be available through our regulations page.

We are committed to helping stakeholders implement the Dodd-Frank Act Title XIV mortgage rules that we issued in January. We want these updates to provide further clarity and guidance on how to comply with the rules. They are an opportunity to address important questions raised by industry, consumer groups, and other agencies. We are prioritizing updates that are important to a large number of providers or consumers and that critically affect mortgage originators’ and servicers’ implementation decisions. We hope you’ll familiarize yourself with the rules we’ve issued and the resources available.

When we post new information like this, we email people who have expressed interest in receiving updates about our regulations. If you want to get messages like that in your inbox, sign up using the form above.

Final list of rural and underserved counties for use in 2013

By

On June 1, 2013, our Escrow Requirements under the Truth in Lending Act rule (Escrows Rule) will go into effect, which requires certain creditors to create escrow accounts for a minimum of 5 years for higher-priced mortgage loans (HPMLs). The rule exempts HPMLs made by certain small creditors that operate predominantly in rural or underserved counties from this requirement. On March 12, 2013, we posted a preliminary list of counties that are rural or underserved (or both), for use in the second part of 2013. That preliminary list applied the rules for determining both rural and underserved status as those rules would be amended by a proposed rule the Bureau intended at that time to publish.

The CFPB is now issuing the final rule based on the proposed rule that we had used to compile the preliminary list. Because the methods for determining rural and underserved status have not changed from the proposed rule, this final list is identical to the preliminary list we posted on March 12. For purposes of applying the exemption in the Escrows Rule, creditors may rely on this list as a safe harbor to determine whether a county is “rural” or “underserved” for loans made from June 1, 2013, through December 31, 2013.

In our Escrows Rule, rural counties are defined by using the USDA Economic Research Service’s urban influence codes, and underserved counties are defined by reference to data collected under the Home Mortgage Disclosure Act (HMDA). As explained in the rule, the Bureau will post a list of such counties on its website, which we are doing today.

We also have several rules that will that take effect in January 2014 that have provisions related to mortgage loans made in rural or underserved counties.

Some counties’ status as rural or non-rural may change from the 2013 list to the 2014 list because of updated information from the 2010 Census. This updated information is still being analyzed by the Economic Research Service, but we’ll post the 2014 list of rural and underserved counties as soon as possible.

See a full table of the regulatory sections involved.

Proposed delay in effective date for Regulation Z provision prohibiting financing of credit insurance

By

In January, we issued several new mortgage rules under the Dodd-Frank Act. Most of these rules take effect in January 2014, but a few provisions are scheduled to take effect on June 1 of this year. This week we issued a proposal that seeks comment on whether to delay the June 1 effective date with regard to a provision concerning credit insurance while we address some interpretive issues that have arisen about the provision.

The proposal concerns the implementation of a prohibition on creditors financing credit insurance premiums in connection with certain consumer credit transactions secured by a dwelling. This provision was adopted in the Loan Originator Compensation Requirements under the Truth in Lending Act (Regulation Z) Final Rule, issued on January 20, 2013.

We welcome comment during the 15 day period following publication of the proposal in the Federal Register.

This proposal follows two we issued last month to clarify and correct some aspects of the 2013 Escrows Final Rule, the Ability-to-Repay and Qualified Mortgage Rule and the Mortgage Servicing Rules. We are issuing these proposals as part of our ongoing commitment to facilitate implementation of the rules we issued under the Dodd-Frank Act in January.

This post is adapted from an email sent to people interested in updates about our regulations. If you want to get messages like this in your inbox, sign up using the form to the right.

Proposed clarifications of the Ability to Repay/QM and Mortgage Servicing Rules

By

The CFPB is carrying out a regulatory implementation initiative for our new mortgage rules to ensure that they are implemented accurately and effectively. Last week we issued proposed clarifications to the 2013 Escrows Final Rule. Today we are issuing another proposal to address questions regarding qualified mortgages and servicing that have come up since we first issued those rules in January. These proposals are part of our commitment to facilitate implementation of the rules issued in January under the Dodd-Frank Act. We at the Bureau believe that we have a responsibility not just to write a rule, but to see that it is implemented effectively. This proposal will be published in the Federal Register soon. It will be open for comment for 30 days from the day of publication.

Today’s proposal addresses five topics:

Debt-to-income ratio

Under the Ability to Repay rule, a lender may make a qualified mortgage (QM), a loan for which certain features are prohibited and fees that can be charged are limited. The rule provides for different types of QMs, the main type requiring that a consumer’s debt-to-income ratio (DTI) show that the consumer’s monthly debt payments, including the mortgage, will not be more than 43% of the consumer’s monthly income. Today’s proposal would provide clearer rules for determining DTI. It would amend language pertaining to a consumer’s employment record and income, obtaining business credit reports and other issues relating to self-employed consumers, and the treatment of Social Security and rental income.

Contract variances and the temporary QM provision

A second type of QM that a lender can make under the ability-to-repay rule requires the loan to be eligible either for purchase or guarantee by the government-sponsored enterprises Fannie Mae or Freddie Mac (the GSEs), or for guarantee or insurance by a federal agency such as the Federal Housing Administration or the Veterans Administration. The provision that allows this type of QM is temporary and will expire after seven years or earlier. Today’s proposal would confirm that loans meeting eligibility requirements provided in a separate agreement between a creditor and a GSE or federal agency can be qualified mortgages, not just those that follow the general GSE or agency guidelines.

Purchase, guarantee or insurability status and the temporary QM

Some GSE or agency requirements, such as loan delivery requirements, are not relevant to QM status. The proposal would clarify that the temporary QM provision’s requirement that mortgages be “eligible” for purchase, insurance, or guarantee does not exclude loans that do not satisfy those procedural and technical requirements. In addition, the fact that a GSE or agency demands repurchase or indemnification of a loan would not determine whether or not the loan is a QM. The specific facts and circumstances of each loan would determine that.

No field preemption under Regulation X

Regulation X implements the Real Estate Settlement Procedures Act (RESPA). The preamble to the 2013 Mortgage Servicing Final Rules issued in January made clear that Regulation X does not preempt the field of possible mortgage servicing regulation by states, and the Bureau is proposing the addition of a comment to Regulation X to emphasize this.

Small servicer exemption

The servicing rules for RESPA and the Truth in Lending Act (TILA) that we issued in January included an exemption for institutions with small servicing operations from some requirements. The proposed changes would clarify which mortgage loans to consider in determining whether a servicer qualifies as small. Loans serviced on a charitable basis will not be included. The changes would also provide several additional examples to illustrate application of the exemption to relationships between servicer and affiliate and between master servicer and subservicer, among others.

After considering the comments we receive, we plan to issue final versions of last week’s Escrows proposal and today’s proposal. In June, we plan to issue additional proposed clarifications about the new mortgage rules, including the servicing rules touched on here and the 2013 Loan Originator Final Rule.

We issue these updates to provide further clarity and assistance on complying with the rules we issued in January. We continue to prioritize updates that affect a large number of providers or consumers and that critically affect mortgage originators’ and servicers’ implementation decisions.

To get more details about these changes, please see the proposed rule.

If you want us to email you when we propose or issue updates or release other information to support compliance with new CFPB rules, sign up using the form above.

Proposed clarification of the 2013 Escrows Final Rule

By

Today, we issued a proposed rule clarifying and making technical amendments to the 2013 Escrows Final Rule issued by the Bureau this past January. This is the first of our planned issuances to clarify and provide additional guidance about the mortgage rules we issued in January.

The proposal has two primary purposes:

Maintaining Consumer Protections
The 2013 Escrows Final Rule amends an existing rule that also provides protections regarding assessments of consumers’ ability to repay and prepayment penalties on certain “higher-priced” mortgage loans. The Dodd-Frank Act and certain of the other mortgage regulations we issued in January expand and strengthen the requirements concerning ability to repay and prepayment penalties. However, the 2013 Escrows Final Rule as adopted in January can be read to cut off the old protections before the new expanded protections take effect. This would create a six-month period when those consumer protections would not apply. The proposed rule establishes a temporary provision to ensure existing protections remain in place for higher-priced mortgage loans until the expanded provisions take effect in January 2014.

“Rural” and “Underserved” Definitions
First, the Bureau is ensuring consumer protections are maintained. We are also proposing to clarify how to determine whether or not a county is considered “rural” or “underserved” for purposes of applying an exemption in the escrows rule and special provisions adopted in three other Dodd-Frank Act mortgage rules we issued in January. We also propose illustrations of how to do the determinations to facilitate compliance. The determinations are made based on currently applicable Urban Influence Codes or UICs, which are established by the USDA’s Economic Research Service (for “rural”), or based on HMDA data (for “underserved”). We used the proposed changes to compile the preliminary rural or underserved counties list posted on our website.

We welcome comment on this proposed rule. The comment period will close 15 days after publication in the Federal Register. We will update the Escrows rule page when it is published.

Later this month, we plan to issue additional proposed clarifications and guidance about the new mortgage rules. Periodic updates will continue to be made on as-needed basis. They will be available through our regulations page.

We are committed to helping stakeholders implement the Dodd-Frank Title XIV mortgage rules that we issued in January. We want these updates to provide further clarity and guidance on how to comply with the rules. They are an opportunity to address important questions raised by industry, consumer groups, and other agencies. We are prioritizing updates that are important to a large number of providers or consumers and that critically affect mortgage originators’ and servicers’ implementation decisions. We hope you’ll familiarize yourself with the rules we’ve issued and the resources available.

This post is adapted from an email sent to people interested in updates about our regulations. If you want to get messages like this in your inbox, sign up using the form above.

A small entity compliance guide for the Ability-to-Repay and Qualified Mortgage rule

By

Today, we published our Small Entity Compliance Guide for the Ability-to-Repay and Qualified Mortgage Rule.

Our goal with this guide is to provide a comprehensive rule summary in a plain language and FAQ format, which makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.

Over the next several weeks, we will publish guides for each of the new mortgage rules. They will be available on the individual rule pages on our website. (Note that although each guide summarizes a rule, it is not a substitute for the underlying rule.)

As soon as we publish them, we will email everyone who signed up to receive updates on our Regulations page. In fact, this post is adapted from one of these emails. If you want to get this message in your inbox, sign up using the form to the right.