Ability-to-Repay/Qualified Mortgage Rule — Regulation Z, effective 1/10/2014

Creditors must make a reasonable, good faith determination of a consumer’s ability to repay (ATR) a loan secured by a dwelling based on specified underwriting criteria. The rule applies to most closed end, consumer credit transactions but excludes home equity lines of credit (HELOC), timeshare loans, reverse mortgages, and short-term bridge and construction loans of 12 months or less. The rule also exempts certain creditors and loan programs, such as loans made by a state housing finance agency. Creditors that offer “qualified mortgages” (QMs) are presumed to comply with the ATR requirement. There are several categories of QMs, which generally limit points and fees charged to the borrower, prohibit certain risky loan features, such as negative amortization, and have other specific underwriting requirements. Two QM categories are uniquely available to “small creditors” (determined by asset size and loan volume). The CFPB has published a small business compliance guide for this rule.

Appraisals for Higher-Priced Mortgages — Regulation Z, effective 1/18/2014, except 7/18/2015 for manufactured home loans

The rule adds consumer protections for appraisals for certain closed-end higher-priced mortgages (HPMLs), including requiring creditors to provide certain disclosures and a free copy of the appraisal to borrowers. (Creditors may charge borrowers a fee to perform an appraisal but cannot charge a fee for providing a copy.) The rule also requires second appraisals for “flips” in certain circumstances. Exempt transactions include qualified mortgages. A supplemental rule issued on December 12, 2013 includes, among other things, special provisions applicable to manufactured home loans and extends the mandatory compliance date for those provisions until July 18, 2015. The CFPB has published a small business compliance guide for this rule.

Appraisals Under the Equal Credit Opportunity Act — Regulation B effective 1/18/2014

The rule modifies the existing Regulation B requirements for appraisals by requiring creditors to provide certain disclosures and promptly provide a free copy of an appraisal to the consumer, rather than only requiring the creditor to do so in response to a consumer request. However, the rule narrows the scope of coverage to first-lien mortgages, and therefore the existing Regulation B appraisal notice will no longer be required for subordinate liens. Creditors may charge borrowers a fee to perform an appraisal but cannot charge a fee for providing a copy.

The rule also addresses the timing requirements for transactions subject to both the ECOA and the TILA HPML appraisals rules. The CFPB has published a small business compliance guide for this rule.

Escrow Requirements — Regulation Z, effective 6/1/2013, except 1/1/2014 for small creditor exemption in §1026.35(b)(2)(iii)

Since 2010, creditors have been required to establish and maintain escrow accounts for originated HPMLs secured by a first lien on a principal dwelling. The final rule lengthens the required period for such mandatory escrows from one to five years. The final rule also expands an existing exemption from escrowing certain insurance premiums on condominium-secured loans to include other types of property covered by a master insurance policy. The rule further exempts small creditors (determined by asset size and loan volume) that operate predominantly in rural or underserved areas and meet other eligibility requirements. The CFPB has published a small business compliance guide for this rule.

High-Cost Mortgage and Homeownership Counseling Amendments — Regulations X and Z, effective 1/10/2014

The rule expands the protections under the Home Ownership and Equity Protection Act (HOEPA) to cover home-purchase loans and HELOCs and revises the HOEPA coverage tests. It also implements additional restrictions and conditions on HOEPA loans, including a preloan homeownership counseling requirement. The rule also implements additional homeownership counseling requirements not limited to HOEPA loans, including that all applicants for loans covered by the RESPA receive a list of local homeownership counselors. The CFPB has published a small business compliance guide for this rule.

Integrated RESPA/TILA Mortgage Disclosure Rule — Regulations X and Z, effective 8/1/2015

The rule combines the separate mortgage disclosures required by the RESPA and the TILA at the time of application and at consummation into single integrated disclosures. The TILA early disclosure statement and the RESPA good-faith estimate are replaced with the Loan Estimate, and the TILA final disclosure statement and HUD-1 are replaced with the Closing Disclosure. Among other substantive changes, the rule amends the definition of “application” for purposes of determining when the Loan Estimate must be provided, and requires that the Closing Disclosure in most cases be received by the borrower at least three business days before closing.

Loan Originator Compensation — Regulation Z, effective 1/1/2014, except 6/1/2013 for arbitration ban

In 2011, the Federal Reserve Board (Board) amended Regulation Z to add restrictions on loan originator compensation (LOC). The Board’s rule prohibits LOC from varying with loan terms and conditions (except for the amount of credit extended), provides that LOC can be paid by the consumer or by the creditor but not by both, and prohibits originators from steering a consumer to a loan because of higher LOC. The CFPB’s rule clarifies these restrictions and adds new ones. For example, the rule clarifies the definitions of “loan originator” and a proxy for loan term and condition and clarifies that certain profit-sharing arrangements and bonus plans are permitted. The rule also prohibits creditor financing of certain credit insurance premiums, prohibits mandatory arbitration clauses in residential mortgage contracts, and imposes training and background-check requirements on loan originators not required to be licensed under the Secure and Fair Enforcement for Mortgage Licensing Act. The CFPB has published a small business compliance guide for this rule.

Mortgage Loan Servicing — Regulations X and Z, effective 1/10/2014

The rule revises and expands consumer protections for loan servicing, including new requirements for loss mitigation (including requirements for application intake, evaluation and notification, and appeal); servicer policies and procedures, early intervention and continuity of contact rules for delinquent borrowers; and restrictions on dual tracking; a periodic statement requirement for certain loans; a new initial interest-rate change and a revised interest-rate adjustment notices for adjustable rate mortgages. The rule implements additional protections regarding forced-placed insurance, revised error resolution procedures, and information request requirements. “Small servicers” (who service 5,000 or fewer mortgages and are creditor or assignee for loans) are exempt from some of the servicing rules. The CFPB has published a small business compliance guide for this rule.