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CFPB Amends Mortgage Rules for Nonprofits

CFPB

Updated to add comments.

The Consumer Financial Protection Bureau (CFPB) announced Wednesday it is proposing “minor changes” to its mortgage rules to assist nonprofit organizations in getting loans to underserved communities.

“Our mortgage rules are now helping to protect consumers all across the country from debt traps, runarounds, and surprises,” said CFPB Director Richard Cordray in a statement. “Today’s proposal would maintain those strong protections, while making minor changes to ensure consumers have access to credit.”

Included in the released proposals is an amendment to expand the definition of a “small servicer”—a group exempt from the bureau’s new mortgage servicing rules—to include certain 501(c)(3) nonprofits.

Since the first proposed draft of CFPB’s servicing guidelines, the small servicer exemption has included firms servicing 5,000 or fewer mortgages. However, because some nonprofits service loans for other associated lenders, the bureau cited concerns they may not be able to consolidate their activities and still meet those traditional requirements.

Also proposed is an amendment to the agency’s Ability-to-Repay rule, which implements guidelines for creditors to make “reasonable and good faith determination[s]” as to a borrower’s ability to pay back a loan before lending. While the original rule granted exemptions to groups making no more than 200 mortgages a year, CFPB’s amended guideline would also carve out a spot for some nonprofits to aid in opening up credit access for low- to moderate-income borrowers.

The final proposal released Wednesday would lay out “limited circumstances” through which a lender could refund points and fees beyond the 3 percent cap established in the bureau’s Qualified Mortgage (QM) provisions, creating a little more wiggle room for lenders to provide credit to consumers on loans that push the limit for points and fees.

As always, CFPB is seeking public comment on the newly released proposals, as well as input on other questions regarding the impact of its rules and their potential effect on larger lenders that fall outside the “small creditor” category.

For non-profits, the agency’s new proposals are a delivery on a promise the agency made when it started accepting comments last year on its then-proposed mortgage guidelines.

“When they were first putting out rules for QM, I saw where there was some conflict,” said Paul Turney, EVP for Texas’ Brazos Valley Affordable Housing Corp. “They promised there would be a grace period ... but now it’s in writing.”

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