The Essentials: The CFPB's Final "Ability-to-Repay/Qualified Mortgage" Rules

On January 10, 2013, the Consumer Financial Protection Bureau (the “CFPB”) issued final rules (the “Ability-to-Repay Rules”) amending Regulation Z under the Truth in Lending Act (“TILA”) to implement the ability-to-repay requirement for residential mortgage loans and protections from liability for qualified mortgages and certain other consumer protections as required by Sections 1411, 1412 and 1414 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”).

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Consumer Financial Protection Bureau Releases Final "Ability-to-Repay/Qualified Mortgage" Rules

On January 10, 2013, the Consumer Financial Protection Bureau (CFPB) released its final “Ability-to-Repay/Qualified Mortgage” rules. The rules and the concurrent proposed amendments were posted on the CFPB’s website following published remarks by Director Richard Cordray and a two-hour “field hearing” in Baltimore, MD. The bureau also promised to publish plain-language booklets and educational videos to help guide lenders through the maze of new rules.

The rules, which are over 800 pages long, are “final” in the sense that they have been revised from the proposed rules that were released for comment last summer, and they are now “official.” However, the rules do not take effect for another year (January 10, 2014), and the bureau issued an additional 184-page “concurrent proposal” containing potential amendments to the new rules that address and/or clarify unresolved issues such as exemptions for certain nonprofit creditors and homeownership stabilization programs, an additional definition of a qualified mortgage for certain loans made and held in portfolio by small creditors such as community banks and credit unions, and inclusion of loan originator compensation in the points and fees calculation. Notwithstanding the pending amendments and delayed effective date, the rules issued last week will have an enormous impact on the mortgage lending business, and their complexity makes prompt commencement of implementation work essential.

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The Consumer Financial Protection Bureau Provides Guidance for Mortgage Advertising

In a joint-agency media conference and press release with the Federal Trade Commission today, the Consumer Financial Protection Bureau used the “rulemaking-through-enforcement” method of regulation to create several de-facto guidelines for what is “unfair, deceptive, or abusive” in mortgage advertising. Bypassing the more arduous rulemaking process, the CFPB published “sample warning letters” that effectively made the following advertising practices illegal:

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CFPB Indicates Intent to Regulate Service Providers to Financial Institutions

Earlier this year, the Consumer Financial Protection Bureau (“CFPB”) published a Bulletin signaling its intent to regulate and exercise enforcement authority over service providers to financial institutions. Pursuant to Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its implementing regulation, Regulation P, the CFPB has authority over certain large banks, credit unions and other consumer financial services companies. The Bulletin notes that the CFPB’s goal is to ensure compliance with “[f]ederal consumer financial law,” which includes the Gramm-Leach-Bliley Act and its implementing regulations, the Privacy Rule and the Safeguards Rule.

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With Appointment of Richard Cordray Consumer Watchdog Sets its Agenda

With the January 4, 2012 recess appointment of former Ohio Attorney General Richard Cordray as its first director, the Consumer Financial Protection Bureau quickly is coalescing around an aggressive regulatory agenda.  What can large financial institutions and other participants in the financial services industry expect from this new federal regulator?

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Consumer Financial Protection Agency Bill Passes the House Financial Services Committee

Today the House Financial Services Committee passed legislation to create the Consumer Financial Protection Agency.  Although the legislation has yet to pass the full House and Senate, the current bill would make the new agency responsible for rulemaking, examination and enforcement of financial institutions that provide consumers with financial products and services.  Furthermore, the Federal Reserve's rulemaking authority under current consumer banking laws would be transferred to the new agency.
Click here for the House Financial Service Committee's press release, and click here for the bill's summary.

Consumer Financial Protection Agency Bill Sent to Capitol Hill

The White House delivered to Capitol Hill today draft legislation for the creation of the Consumer Financial Protection Agency, according to a Treasury Department press release.  The draft legislation, officially called the Consumer Financial Protection Agency Act of 2009, is part of a broader effort on the part of the White House and Congress to pass financial industry regulatory reform legislation by the end of the year.  The new agency's consumer portfolio will include credit cards to mortgages, according to the Treasury Department.  In order to create the new agency, Congress must pass both the bill for the agency itself as well legislation modifying the Federal Trade Commission Act. 
Click here for the Treasury Department's press release, click here for the Consumer Financial Protection Agency Act of 2009 draft bill, and click here for draft language to modify the Federal Trade Commission Act.