The Consumer Financial Protection Bureau has adopted a rule that allows lenders to cure violations of the 3% cap on points and fees for qualified mortgage loans. The rule would provide lenders up to 210 days after consummation of the loan to cure overages by making a payment to the borrower of the amount of the overage plus the contractual interest. The cure period is shortened/terminated if prior to the 210 days, the borrower goes 60 days past due, the consumer institutes an action concerning the loan or the consumer sends notice of the excessive fees. While there is no “good faith” requirement as originally proposed, an institution does need to have policies and procedures for post-consummation loan review to detect and cure such errors. These policies do not, however, require the review of all loans nor mandate the cure of all violations.
Although this policy is certainly a benefit to lenders who make a mistake in calculating points and fees, it does not address the more dramatic problems associated with a lack of clarity in the applicable rules. Indeed, the rule would not benefit a creditor that is unclear on issues pertaining to how to account for mortgage insurance, affiliate compensation, extension fees, or other similar challenges. Moreover, it would not provide protection for a lender who as a result of some regulatory action was retroactively deemed to have improperly calculated the cap. While the cure will provide some assistance to lenders, it does not go nearly far enough to addressing the fundamental liquidity issues created by the uncertainty of the ability to repay rules and regulations. Nonetheless, lenders who hope to occasionally take advantage of this rule should immediately prepare and implement policies and procedures associated with post-consummation review and cure of 3% cap calculations.