The CFPB’s new cure: Final revisions to certain mortgage rules

by AffirmX

by: Shelbey Neil

Just as the world of popular medicine seems to evolve (and even contradict itself), so too is the world of regulatory compliance in a constant state of flux. Nowhere is that more evident than with mortgage rules, and the CFPB has released a new mechanism for curing point and fees errors (this statement has not been evaluated by the FDA).

Overview

The CFPB has made some specific amendments to the mortgage rules under Regulation Z. Of interest to financial institutions are the final rule changes that provide a cure mechanism for overages to the points and fees limit for qualified mortgages, with the exception of FHA-insured mortgage loans. HUD is not adopting the changes to the points and fees limits for FHA-insured mortgages, but is providing guidance on curing errors to points and fees made prior to insurance endorsement.

Curing Errors Related to the Limits on Points and Fees for Qualified Mortgages

Section 1026.43(e)(3) of Regulation Z limits the up-front points and fees for qualified mortgages to no more than 3% of the total loan amount, with higher thresholds for various categories of loans below $100,000. Points and fees are defined as the fees and charges that are known at or before consummation.

In some cases, unintended overages may occur that are not discovered until after consummation. Now Regulation Z allows lenders (or an assignee) to cure these overages so that the loan does not lose its status as a qualified mortgage and the lender is not subject to a regulatory violation and/or potential liability.

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