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CFPB’s
Final Mortgage Regulations:
Ability-to-Repay and
Qualified Mortgage Rules
November 4, 2013

E. Andrew Keeney, Esq.
...
Ability-to-Repay
and
Qualified Mortgage Rules
E. Andrew Keeney, Esq.
Kaufman & Canoles, P.C.
150 West Main Street, Suite 2100
Norfolk, VA 23510
(757) 624-3153
eakeeney@...
History
Proposed Regulation: 474 pages
Comments Received: 1800
Final Regulation: 804 pages
Effective Date: January 10, 201...
Will the Ability to Repay Rule be
Workable for Credit Unions?
Overview
• Applies to ALL credit unions offering mortgage loans
• Must determine a consumer’s ability to repay a mortgage
...
Ability to Repay
and Qualified Mortgage Rule
January 2013
• CFPB amended Regulation Z (Truth in
Lending Act) by issuing ne...
Ability to Repay
and Qualified Mortgage Rule
• Regulation Z currently prohibits lenders from
making a higher-priced or hig...
Ability to Repay
and Qualified Mortgage Rule
• New Ability-to-Repay Rule applies to all closed-end
mortgage loans (home pu...
Ability to Repay Determinations
(at a minimum credit unions must consider
8 underwriting factors in determining
a borrower...
Minimum Underwriting Factors
1. Current or reasonably expected income or assets
Current or Reasonably Expected
Income or Assets Determination
• Section 1026.43(b)(4) prescribes the manner
in which the c...
Current or Reasonably Expected
Income or Assets Determination
• May review specified records to satisfy this
requirement
•...
Minimum Underwriting Factors
1. Current or reasonably expected income or assets
2. Current Employment Status
Minimum Underwriting Factors
1. Current or reasonably expected income or assets
2. Current Employment Status
3. The monthl...
Minimum Underwriting Factors
1.
2.
3.
4.

Current or reasonably expected income or assets
Current Employment Status
The mo...
Minimum Underwriting Factors
1.
2.
3.
4.
5.

Current or reasonably expected income or assets
Current Employment Status
The...
Minimum Underwriting Factors
1.
2.
3.
4.
5.

Current or reasonably expected income or assets
Current Employment Status
The...
E. Andrew Keeney, Esq.
Kaufman & Canoles, P.C.
150 West Main Street, Suite 2100
Norfolk, VA 23510
(757) 624-3153
eakeeney@...
CFPB’s
Final Mortgage Regulations:
Ability-to-Repay and
Qualified Mortgage Rules
November 4, 2013

E. Andrew Keeney, Esq.
...
CFPB's Final Mortgage Regulations: Ability to Repay and Qualified Mortgage Rules - MACUMA Presentation
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CFPB's Final Mortgage Regulations: Ability to Repay and Qualified Mortgage Rules - MACUMA Presentation

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Andy Keeney made this presentation before MACUMA on November 4, 2013

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Transcript of "CFPB's Final Mortgage Regulations: Ability to Repay and Qualified Mortgage Rules - MACUMA Presentation"

  1. 1. CFPB’s Final Mortgage Regulations: Ability-to-Repay and Qualified Mortgage Rules November 4, 2013 E. Andrew Keeney, Esq. Kaufman & Canoles, P.C.
  2. 2. Ability-to-Repay and Qualified Mortgage Rules
  3. 3. E. Andrew Keeney, Esq. Kaufman & Canoles, P.C. 150 West Main Street, Suite 2100 Norfolk, VA 23510 (757) 624-3153 eakeeney@kaufcan.com
  4. 4. History Proposed Regulation: 474 pages Comments Received: 1800 Final Regulation: 804 pages Effective Date: January 10, 2014 Number of Days Remaining: 67 Let’s Roll!
  5. 5. Will the Ability to Repay Rule be Workable for Credit Unions?
  6. 6. Overview • Applies to ALL credit unions offering mortgage loans • Must determine a consumer’s ability to repay a mortgage before making the loan • Regulation covers all consumer mortgages except home equity (HELOCs), timeshare plans, reverse mortgages or temporary loans • Ability-to-Repay determination and underwriting considerations • Underwriting considerations • Qualified mortgages and a “Safe Harbor” • Exemptions
  7. 7. Ability to Repay and Qualified Mortgage Rule January 2013 • CFPB amended Regulation Z (Truth in Lending Act) by issuing new regulations governing mortgage lending requirements, known as the “Ability-to-Repay and Qualified Mortgage Rule” Effective date: January 10, 2014
  8. 8. Ability to Repay and Qualified Mortgage Rule • Regulation Z currently prohibits lenders from making a higher-priced or higher-cost mortgage loan without regard for the consumer’s ability to repay the loan • New Rule establishes minimum requirements for all lenders to make an ability-to-repay determination prior to extending a residential mortgage loan • New Rule offers Safe Harbors from liability
  9. 9. Ability to Repay and Qualified Mortgage Rule • New Ability-to-Repay Rule applies to all closed-end mortgage loans (home purchases, refinancing, home equity loans, vacation home loans, etc.) • Does not apply to open-end credit plans, time share plans, reverse mortgages or temporary loans (i.e., 12 months or less) • New Rule goes into effect January 10, 2014 • BUT, some rule changes may be in the works
  10. 10. Ability to Repay Determinations (at a minimum credit unions must consider 8 underwriting factors in determining a borrower’s ability to pay)
  11. 11. Minimum Underwriting Factors 1. Current or reasonably expected income or assets
  12. 12. Current or Reasonably Expected Income or Assets Determination • Section 1026.43(b)(4) prescribes the manner in which the creditor verifies the borrower’s assets or income • May review specified records to satisfy this requirement – – – – Tax returns IRS Form W-2 (or similar forms) Employer records Government agency records (e.g., Social Security Administration “proof of income” letter)
  13. 13. Current or Reasonably Expected Income or Assets Determination • May review specified records to satisfy this requirement • Financial institution records • Check cashing receipts • Credit union needs to verify only the income/assets actually relied upon in making its determination of whether to extend credit
  14. 14. Minimum Underwriting Factors 1. Current or reasonably expected income or assets 2. Current Employment Status
  15. 15. Minimum Underwriting Factors 1. Current or reasonably expected income or assets 2. Current Employment Status 3. The monthly payment on the covered transaction
  16. 16. Minimum Underwriting Factors 1. 2. 3. 4. Current or reasonably expected income or assets Current Employment Status The monthly payment on the covered transaction The monthly payment on any simultaneous loans
  17. 17. Minimum Underwriting Factors 1. 2. 3. 4. 5. Current or reasonably expected income or assets Current Employment Status The monthly payment on the covered transaction The monthly payment on any simultaneous loans The monthly payment for mortgage-related obligations 6. Current debt obligations, alimony and child support
  18. 18. Minimum Underwriting Factors 1. 2. 3. 4. 5. Current or reasonably expected income or assets Current Employment Status The monthly payment on the covered transaction The monthly payment on any simultaneous loans The monthly payment for mortgage-related obligations 6. Current debt obligations, alimony and child support 7. The monthly debt-to-income ratio or residual income 8. Credit history
  19. 19. E. Andrew Keeney, Esq. Kaufman & Canoles, P.C. 150 West Main Street, Suite 2100 Norfolk, VA 23510 (757) 624-3153 eakeeney@kaufcan.com
  20. 20. CFPB’s Final Mortgage Regulations: Ability-to-Repay and Qualified Mortgage Rules November 4, 2013 E. Andrew Keeney, Esq. Kaufman & Canoles, P.C.
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