CFPB Finalizes Amendments to Qualified Mortgage Rule

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.
Under the amendments, the CFPB provides certain exceptions to the Dodd-Frank requirement that loan originator compensation be included in the permissible points and fees. The compensation paid by a mortgage broker to a loan originator employee does not count towards the points and fees threshold.

The amendments take effect with the Ability-to-Repay rule on January 10, 2014.

The Community Bankers Association of Illinois appreciates the CFPB’s willingness to amend the Ability-to-Repay rule. In a February 22, 2013 comment letter, CBAI strongly advocated for the new “small creditor” category, a $5 billion asset and 3,500 mortgage threshold, as well as expanded definitions of “rural” and “underserved’ communities. CBAI and the Independent Community Bankers of America will continue to work with the CFPB to make this rule more favorable for community bank participation in residential mortgage lending.