Your Qualified Mortgage and the New CFPB Exam Procedures
A second update to the Consumer Financial Protection Bureau (CFPB) examination procedures has arrived, bringing with it a host of changes. Among other topics, this recent update addresses your qualified mortgage and your ability to repay. Mortgage lenders are tasked with the responsibility of ushering in a new era in lending and loan origination.
The ability-to-repay rule
Lenders are now required to consider a prospective buyer’s financial information and to verify its accuracy. Evaluations regarding ability to repay a loan must be based upon stricter guidelines. Teaser rates are no longer allowed as the basis of evaluation. Instead, loan originators must make a determination regarding both the principal and interest over the life of a mortgage. Points and fees are now subject to new limitations, and terms cannot exceed 30 years. Interest-only payments are no longer acceptable; balloon payments are almost always banned.
New lender requirements for your qualified mortgage
Under this second 2013 update to the CFPB procedures, mortgage lenders are now required to provide a new level of service to delinquent borrowers. Loan origination companies must ensure easy access to a dedicated employee who is responsible for helping delinquent borrowers. In the event of a likely foreclosure, mortgage providers are also required to consider all available alternatives to help the borrower retain home possession.
Dual tracking is also restricted under these new guidelines. No longer is it acceptable to begin foreclosure proceedings if your borrower is actively seeking a loan modification or foreclosure alternative. You must provide your clients with regular monthly statements and disclosures, as well. Payment breakdowns by principal, fees, escrow and interest — along with recent activity on an account — should be included on these statements. In the case of adjustable-rate mortgages, disclosures must also be provided before the first rate adjustment and before a payment amount is adjusted.
Origination of a qualified mortgage now requires additional oversight and diligence, but these adjustments are relatively easy to manage. Compliance with CFPB rules will require you to familiarize yourself with these guidelines and adjust business practices accordingly.
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