As expected in light of Director Cordray’s comments last week, on Friday, the CFPB finalized several amendments and clarifications to the mortgage rules, proposed on June 24, 2013 (see our previous Legal Alert outlining the amendments as proposed). The amendments include revisions to the CFPB’s mortgage servicing rules, loan originator compensation rules, and ability-to-repay rules. Certain of the changes are detailed below.
- The amendments include a process for servicers to offer short-term forbearance plans to delinquent borrowers, without completing the full loss-mitigation evaluation process. The rule permits a servicer to provide a six-month forbearance to a borrower who is suffering a short-term, temporary hardship, upon reviewing an incomplete loss mitigation application.
- The amended rule clarifies which servicer activities are prohibited during the first 120 days of delinquency. Under the final rule, servicers will be allowed to send certain early delinquency notices required under state law that may provide information regarding borrower counseling or other resources.
- The amendments include specific procedures for obtaining follow-up information in the event a servicer fails to identify and inform a borrower that information is missing, upon initial review of a loss mitigation application.
- The amended rule provides additional details on how to inform borrowers about the servicer’s contact address for the purpose of complaints and information requests.
Loan Originator Compensation
- The amended rule clarifies activities that administrative employees of a creditor or loan originator may engage in without being considered loan originators.
- The amended rule changes the effective date for most of the loan originator compensation provisions from January 10, 2014 to January 1, 2014.
Financing Credit Insurance Premiums
- The amended rule includes clarifications regarding the prohibition on financing credit insurance premiums. The rule now provides that credit insurance premiums are financed by a creditor when the creditor allows the consumer to defer payment of the premium past the month in which it is due. Further, the amended rule clarifies how the rule applies to levelized premiums.
Ability to Repay
- The amended rule clarifies the types of fees and charges that must be counted toward points and fees thresholds under the ability-to-repay and high-cost mortgage rules. As proposed, (1) points and fees items paid by third parties are included in the points and fees calculation as if paid by the consumer, (2) points and fees items paid by the seller are included in the points and fees calculation as if paid by the consumer, except for seller’s points which are excluded from points and fees, and (3) points and fees items paid by the creditor are excluded from the points and fees calculation, except for compensation paid to a non-employee loan originator which must be included in points and fees.