JAN 9, 2014

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Compliance Matters

CFPB Could Be Going After Small Lenders

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 PLEASE REVIEW THE FOLLOWING IN YOUR BEST INTEREST

Because of the constant state of flux of the CFPB regulations in compensation, ability to repay, qualified mortgages and other areas and the varying interpretations given to them we are unable to guarantee how CFPB will interpret the contracts, acts and operations including operating procedures used by mortgage lenders and brokers. At this moment to our understanding and investigation CFPB is auditing multiple “small” lenders as well as the major ones. The reason most small mortgage lenders and mortgage brokers are unaware of it is because investigations are not made public until a final decision has been reached. If any of you have been audited or received inquiries from CFPB for any reason we would like to know the date, type of inquiry, what occurred and the outcome. This allows us to put together a scenario in your best interest over time. In other words the data allows us to fine tune how we protect your interests.

Please email me at h.thordsen@lendinglaw.com. If you prefer you can call me at (714) 662-4990 about the inquiries but please have the facts chronologically. 

A  REMINDER ABOUTABILITY TO REPAY THAT GOES INTO EFFECT ON JAN. 10

FACTS

The Ability to Repay rule is set to go into effect on Jan. 10. The regulation, promoted by the Consumer Finance Protection Bureau, is written to deter what the government calls "risky features," such as loans allowing for interest-only payments or negative amortization.

The new standards also do not generally allow for points or fees charged to a borrower to add up to more than 3% of the loan amount.

Home loans that meet the new standards will be "qualified mortgages."  The new rule does not always forbid lenders from issuing loans that do not conform to the standards, but issuing qualified mortgages provides greater legal protections if a borrower files a lawsuit claiming that a lender failed to properly assess his or her ability to make mortgage payments.

The CFPB states the new rule effectively prohibits the "no documentation" loans that were issued before the housing bubble burst. Ability to Repay requires lenders to take into account a buyer's employment status, along with his or her other debts and financial obligations. The rule generally requires that a borrower's debt-to- income ratio should not exceed 43% of earnings.  (lat1114)

MORAL

Remember Richard Cordray is auditing. The information I have says he is auditing the smaller lenders and has filed against many of them. They are not published because they are not resolved as yet. If you are a lender, I suggest that you audit your affairs for Reg Z and General CFPB compliance. This in the long run is a lot less expensive than defending allegations brought by the CFPB and paying both penalties and attorneys.  If you need an audit you can contact us. 

 

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE

 

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