So far, the CFPB has been busy taking over regulatory duties inherited from the Fed and other agencies. With the appointment of Richard Cordray as director of the CFPB, the question now becomes, “What are the top priorities for new regulations?”
In January, the CFPB made their indications of their priorities for the next year with the publication of their Regulatory Agenda. Although precise dates are still not set on the agenda, the list sheds light on the sequence the Bureau will follow in rolling out numerous rules to financial institutions. Below is a quick summary of the priorities and estimated timeframes of the rules that will most impact mortgage lenders.
- TILA Ability to Repay (Regulation Z): The Federal Reserve Board published for public comment on May 11, 2011, a proposed rule amending Regulation Z to implement amendments to the Truth in Lending Act (TILA) made by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Regulation Z currently prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan. The proposal would implement statutory changes made by the Dodd-Frank Act that expand the scope of the ability-to-repay requirement to cover any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan). In addition, the proposal would establish standards for complying with the ability-to-repay requirement, including by making a “qualified mortgage.” The proposal also implements the Dodd-Frank Act’s limits on prepayment penalties. Finally, the proposal would require creditors to retain evidence of compliance with this rule for three years after a loan is consummated. Pursuant to the Dodd-Frank Act, the rulemaking authority for the TILA transferred from the Board to the CFPB on July 21, 2011. The CFPB is working to issue a final rule.
- TILA/RESPA Mortgage Disclosure Integration: The CFPB will publish a proposed rule and model mortgage disclosure forms that will integrate the disclosure requirements of the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA). The proposed rule would amend and integrate portions of Regulation Z (Truth in Lending) and Regulation X (Real Estate Settlement Procedures Act), which currently require mortgage lenders and brokers to provide separate sets of disclosures to consumers. The proposed model forms will be designed to enhance consumer understanding and provide guidance to lenders and brokers on compliance with the amended disclosure requirements.
- Home Ownership and Equity Protection Act (HOEPA): The CFPB is developing proposed regulations to implement the amendments made by Dodd-Frank Act to the Truth in Lending Act (TILA) and, specifically, to the high-cost mortgage provisions added to TILA by HOEPA. The amendments made by the Dodd-Frank Act expand the scope of HOEPA coverage, by, among other changes: including home-purchase loans and open-end credit plans (including home equity lines of credit); revising the thresholds that trigger HOEPA coverage including the annual percentage rate triggers and the “points and fees” trigger; and covering loans with prepayment penalties that exceed certain thresholds or that extend beyond 36 months after the closing of the loan. The amendments also add certain restrictions and requirements with regard to HOEPA loans including: prohibiting the financing, directly or indirectly, of any points and fees; prohibiting prepayment penalties and, in most circumstances, balloon payments; and requiring pre-loan counseling for consumers. The CFPB expects to issue proposed regulations implementing the new requirements of HOEPA.
- Mortgage Originator Standards (Reg. Z): The CFPB is developing proposed regulations to implement the amendments made by Dodd-Frank Act, to TILA, and to Regulation Z’s loan originator compensation standards. Prior to the Dodd-Frank Act, the Federal Reserve Board (Board), as part of its August 26, 2009, proposal pertaining to closed-end credit, proposed prohibiting certain compensation payments to loan originators and prohibiting steering consumers to loans not in their interest because the loans would result in greater compensation for the loan originator. The Board published a final rule on loan originator compensation on September 24, 2010, to protect consumers from unfair or abusive lending practices that can arise from certain loan originator compensation practices. The CFPB expects to issue proposed regulations clarifying the use of the unique identifier, payment of discount points and origination points, and anti-steering rules.
- Alternative Mortgage Transaction Parity: On July 22, 2011, the CFPB published an interim final rule necessary to fill a regulatory gap created by the amendments to the Alternative Mortgage Transaction Parity Act (AMTPA) in section 1083 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). This interim final rule clarifies the circumstances under which state housing creditors may make alternative mortgage transactions pursuant to AMTPA in states that prohibit such transactions. The interim final rule is in place as a temporary measure pending the CFPB’s promulgation of permanent rules under section 1083. Because section 1083 requires the Bureau to assess predecessor agencies’ rules under AMTPA and to promulgate regulations governing alternative mortgage transactions by federally chartered housing creditors in addition to state housing creditors, the CFPB will next develop a Notice of Proposed Rulemaking to implement the broader rulemaking.
- Requirements for Escrow Accounts (Regulation Z): The Federal Reserve Board (Board) published in the Federal Register on March 2, 2011, a proposed rule to implement certain amendments to the Truth in Lending Act (TILA) made by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) that lengthen the time for which a mandatory escrow account established for a higher-priced mortgage loan must be maintained. In addition, the Board’s proposal would implement the Dodd Frank Act’s disclosure requirements regarding escrow accounts. The Board’s proposal also would exempt certain loans from the statute’s escrow requirement, pursuant to authority in the Dodd-Frank Act. The primary exemption would apply to mortgage loans extended by creditors that operate predominantly in rural or underserved areas and meet certain other prerequisites. Pursuant to the Dodd-Frank Act, the rulemaking authority for the TILA transferred from the Board to the CFPB on July 21, 2011. The CFPB is working to issue a final rule.
- Home Mortgage Disclosure Act (HMDA): Define the amendments made by the Dodd-Frank Act expand the scope of information relating to mortgage loans that must be collected and maintained under HMDA, including information about the points and fees payable at origination, the difference between the annual percentage rate associated with the loan and the benchmark rate(s) for all loans, the term of any prepayment penalty, the value of any real property pledged or proposed to be pledged as collateral, the actual or proposed term in months of the mortgage loan, and the age of applicant(s).
- Amendments to TILA and FIRREA Concerning Appraisals: The CFPB is participating in interagency rulemaking processes with the Federal Reserve Board (Board), the OCC, the FDIC, the NCUA, and the FHFA to develop proposed regulations to implement the amendments made by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) to the Truth in Lending Act (TILA) and the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) concerning appraisals. The amendments made by the Dodd-Frank Act to TILA require creditors to obtain an appraisal, including a physical property visit by a certified appraiser, before extending higher-risk mortgage credit. The TILA amendments also impose various new requirements for appraisal independence, the portability of appraisal reports, and charging of customary and reasonable fees. The amendments made by the Dodd-Frank Act to FIRREA require new minimum requirements to be applied by states in the registration, reporting, and supervision of appraisal management companies. The FIRREA amendments further require implementing regulations for new quality control standards for automated valuation models to ensure a high level of confidence in the estimates produced by the valuation models, protect against the manipulation of data, seek to avoid conflicts of interest, require random sample testing and reviews, and address any other factor that the agencies determine to be appropriate. As required by the Dodd-Frank Act, the Board published an interim final rule implementing some of these requirements on October 28, 2010. Further action with respect to this rulemaking will be addressed through the interagency rulemaking process.
All regulatory descriptions courtesy Reginfo.gov. (http://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST¤tPub=true&agencyCode=&showStage=active&agencyCd=3170)