Today, the CFPB is issuing an interim rule effective immediately to fill a regulatory gap.
Some lenders are chartered or licensed by states, while others operate under federal charters. For years, state lenders have been able to rely on a federal law called the Alternative Mortgage Transaction Parity Act (or AMTPA, for short) to make variable rate loans and other “alternative” mortgages, regardless of state law restrictions. Congress passed AMTPA to allow state lenders to make alternative mortgages on the same footing as their federally chartered competitors. Last year, the Dodd-Frank Act amended AMTPA to update it and to provide states more room to regulate certain fixed-rate loans and certain features of adjustable rate mortgages.
Without this interim rule implementing the AMTPA amendments, state lenders would lose their ability – overnight – to rely on AMTPA to make alternative mortgages. That could hurt not just state lenders that rely on AMTPA, some of which may be small rural banks. It could also hurt consumers by reducing their access to mortgages from those lenders. And, all of this harm would occur quite suddenly.
This interim rule will help preserve certainty in affected mortgage markets. It will also give lenders, consumers, and state regulators time to adjust to recent changes to the law. AMTPA was designed to preserve consumer access to alternative mortgages. These mortgages aren’t for everyone, but some consumers find that alternatives to the traditional fixed-rate mortgage better suit their needs. Our action today helps preserve parity and access as Congress intended.
Today’s rule also reflects the Dodd-Frank Act’s amendments to AMTPA, and the CFPB will continue to work to implement Congress’ goals. But the full process will take time. We are asking for public feedback on the temporary rule we are issuing today. This input will help us develop a proposal for a permanent regulation, which we will issue for public comment and then revise before finalizing. In the meantime, the interim rule will prevent disruptions of mortgage lending and allow orderly implementation of the Dodd-Frank amendments.
The interim rule gives state lenders two choices: They can follow state law when they make alternative mortgages or they can follow some straightforward federal requirements that provide consumers basic protections. For example, under the federal requirements, lenders must use a fair and transparent method – like a publicly available index that the lender does not control – for changing the rate on an adjustable rate loan.
The Dodd-Frank Act requires that the permanent rule address alternative mortgages made by federally chartered lenders as well as state lenders. So we are seeking information about alternative mortgages generally, as well as those made specifically under AMTPA. Please provide us with your input on the interim rule by September 22, 2011, to help us begin the process of proposing a new permanent rule for public comment.