The Bureau of Consumer Financial Protection (the “CFPB”) announced April 30 that it is proposing amendments to Regulation Z that will, among other things, permit a creditor that believes in good faith that it has made a qualified mortgage (“QM”) loan and learns afterwards that the loan exceeded the applicable limit on points and fees to refund to the consumer the amount by which the points and fees exceeded the limit, and have the loan retain its QM status. The proposal would require that the refund be made not later than 120 days following consummation of the loan. The proposal would also require the creditor to maintain and follow policies and procedures for post-consummation review of loans and refunding to consumers amounts that exceed the applicable limit.
Proposed commentary would add that if the creditor maintains and follows policies and procedures designed to ensure that points and fees are correctly calculated and do not exceed the applicable limit and prices the loan consistently with other QM loans that were contemporaneously originated by the creditor, those factors may be evidence that the creditor originated the loan in good faith as a QM loan. By contrast, the creditor’s failure to maintain or follow such policies and procedures and price the loan consistently may be evidence that the loan was not originated in good faith as a QM loan.
The CFPB has regularly stressed that mortgage lenders should have good policies and procedures in place and monitor compliance with those policies and procedures. That lesson is once again evident in the proposed rule.
The mortgage lending industry had hoped that the proposed amendments would also officially set forth the CFPB’s position with respect to fees paid by lenders to affiliates that are then paid by the affiliates to third party settlement service providers, but the CFPB chose not to address that issue at this time. The CFPB has stated in meetings with the Mortgage Bankers Association of America that points and fees paid to affiliates but passed through to third party settlement service providers are not included in the points and fees calculation for the purposes of the QM rule, but this position will remain unofficial due to the CFPB’s failure to address this issue in the proposed amendment. Perhaps comments to the CFPB on the proposed amendment that raise this issue will cause the CFPB to address the issue in the final amendment.
As of May 1, the proposed amendments have yet to be published in the Federal Register. The comment period will expire 30 days following such publication. The proposed amendments may be found on the CFPB’s website.