Yesterday, the Consumer Financial Protection Bureau (CFPB) announced that it has finalized amendments modifying the ability-to-repay rule so as to "facilitate access to credit" for small creditors, community development lenders and housing stabilization programs, according to a press release from the bureau. Developed to help prevent another mortgage crisis, the ability-to-repay rule created the "Qualified Mortgages" (QMs) standard, featuring requirements designed to "protect consumers from taking on loans they do not have the financial means to pay back" (see our January 10, 2013, blog post for more information). Under the finalized amendments:

  • Nonprofit and community-based lenders that work "to help low- and moderate-income consumers obtain affordable housing" and make no more than 200 loans per year are exempted from the ability-to-repay rule, as are mortgage loans made through certain homeownership stabilization and foreclosure prevention programs.
  • Small creditors that make 500 or fewer first-lien mortgages annually and have less than $2 billion in assets are provided a two-year transition period during which they can make some balloon loans that will still meet the definition of QMs. These creditors are also allowed to "charge a higher annual percentage rate for certain first-lien Qualified Mortgages while maintaining a safe harbor for the Ability-to-Repay requirements."
  • The points and fees threshold — established to ensure that QMs aren't compromised by excessive compensation paid to loan originators — no longer applies to compensation paid by a mortgage broker to a loan originator employee or by a lender to a loan originator employee. Compensation paid by a creditor to a mortgage broker, as well as "any origination charges paid by a consumer to a creditor," must still be included in the points and fees.

The ability-to-repay rule, complete with these amendments, will go into effect on January 10, 2014. For more, read the full press release.