An official website of the United States Government
  • Home
  • Regulations
  • Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z)

Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z)

The CFPB amended Regulation Z, which implements the Truth in Lending Act (TILA). Regulation Z currently prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan. The final rule implements sections 1411 and 1412 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.” The final rule also implements section 1414 of the Dodd-Frank Act, which limits prepayment penalties. Finally, the final rule requires creditors to retain evidence of compliance with the rule for three years after a covered loan is consummated.

This page contains resources to help you understand the rule and its implications.

Contents

  1. The rule
    1. Final rules submitted to the Federal Register
    2. Effective date
    3. Breakdown of the document’s contents
  2. Compliance guide and related information
    1. Compliance guide
    2. Reference materials
  3. What this means for consumers
  4. Proposals
    1. Concurrent proposal
    2. Related proposals

The rule

Final rules submitted to the Federal Register

September 13, 2013: We issued a final rule amending certain provisions of the rule. It is based on a proposed rule issued in June 2013.
July 10, 2013: We issued a final rule amending certain provisions of the rule. It is based on a proposed rule issued in April 2013.
January 10, 2013: We issued the document containing this final rule. On January 30, 2013, the Office of the Federal Register published the final rule.
May 29, 2013: We issued a final rule amending certain provisions of the rule. It is based on a proposed rule issued in January.

Effective date

This rule is effective January 10, 2014.

Breakdown of the document’s contents

This document contains the following parts:

  • Preamble summarizing why we are issuing the rule, our legal authority, reasoning behind the rule, responses to comments, and analysis of the benefits, costs, and impacts of the rule
  • Regulatory text, which, when effective, will amend Regulation Z and can be found on page 638 in the document above
  • Official interpretations of the rules which can be found on page 690 in the document above

Compliance guide and related information

Compliance guide

Read the Small Entity Compliance Guide to learn more about the rule in a plain language and FAQ format which makes the content more accessible for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.

Reference materials

Review our comparison chart, which compares the general Ability-to-Repay requirements with the requirements for originating Qualified Mortgage loans.

What is a Qualified Mortgage? – a basic guide for lenders.


What this means for consumers

The new rule will go into effect on January 10, 2014. This summary outlines some of the ways we expect it to impact consumers who have residential mortgage loans. Download the consumer summary.


Proposals

Concurrent proposal

The CFPB is proposing to amend Regulation Z, which implements the Truth in Lending Act (TILA). The Dodd-Frank Act requires creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.” The Bureau is proposing certain amendments to the final rule implementing these requirements, including exemptions for certain nonprofit creditors and certain homeownership stabilization programs and an additional definition of a qualified mortgage for certain loans made and held in portfolio by small creditors. The Bureau is also seeking feedback on whether additional clarification is needed regarding the inclusion of loan originator compensation in the points and fees calculation.

View the concurrent proposal here.

You can also view, as individual documents, the concurrent proposal’s preamble, regulatory text, and official interpretations.

Related proposals

June 21, 2013: We issued a proposed rule with request for public comment that proposed certain amendments for several of the final mortgage rules we issued in January 2013. This proposal was published in the Federal Register on July 2, 2013. You can also review comments submitted on the electronic docket.

May 11, 2011: The Office of the Federal Register published the following proposed rule issued by the Federal Reserve Board.

June 5, 2012: The Office of the Federal Register published a a notice reopening the comment period specifically for certain new data and information. That notice, and comments received, are available online: Notice of Reopening of Comment Period to seek comment on certain new data and information submitted during or obtained after the close of the original comment period.

April 19, 2013: We issued a proposed rule with request for public comment that amends some of the final mortgage rules issued by the bureau in January of 2013. Specifically, it amends this rule and the mortgage servicing rule.

April 30, 2014: We issued a proposed rule with a request for public comment that amends some of the mortgage rules issued by the bureau in 2013. Specifically, it amends this rule and the mortgage servicing rule.

The CFPB blog aims to facilitate conversations about our work. We want your comments to drive this conversation. Please be courteous, constructive, and on-topic. To help make the conversation productive, we encourage you to read our comment policy before posting. Comments on any post remain open for seven days from the date it was posted.