May 30, 2013 The Consumer Financial Protection Bureau (CFPB) finalized amendments to the Ability-to-Repay/Qualified Mortgage (QM) rule by creating specific exemptions and modifications for small creditors and by also revising the rule on how to calculate loan origination compensation. READ CFPB FINAL RULE. Under the amendments, the CFPB made several adjustments to the Ability-to-Repay rule to facilitate lending by small creditors, including community banks that have less than $2 billion in assets and make 500 or fewer first-lien mortgage loans.
- The rule extends QM status to loans that small creditors hold in their own portfolio even if the customers’ debt-to-income ratio exceeds 43%.
The rule provides a two-year transition period during which small creditors can make balloon loans and those loans will meet the definition of QMs. During this transition period the CFPB will study whether the definition of “rural” or “underserved” needs to be changed.
The rule allows small creditors to charge a higher annual percentage rate for first-lien QMs while maintaining a safe harbor for the Ability-to-Repay requirements.