That is the question state-licensed and state-chartered mortgage lenders (state housing creditors) should be asking in light of the CFPB’s interim final rule which became effective July 22, 2011. Because the rule significantly narrows the preemption available under the Alternative Mortgage Transaction Parity Act (AMTPA), the answer to this question could be “no” for many mortgage products now offered by state housing creditors.
So when can state housing creditors still rely on AMTPA preemption? Basically speaking, state housing creditors can now only rely on AMPTA to ignore state laws that prohibit or restrict making variable- or adjustable-rate mortgage loans. If state law doesn’t allow loans such as fixed-rate mortgage loans with interest-only payments or negative amortization features or certain fixed-rate balloon loans, state housing creditors can’t make those loans. And when making variable- or adjustable-rate mortgages, state housing creditors have to pay attention to state law disclosure requirements or restrictions on features such as rate increases for late payments, interest-only payments, and negative amortization.
What this means is that state housing creditors need to immediately review their mortgage products under state law to determine if any products should be eliminated or changed because AMTPA preemption is no longer available. Even if state law doesn’t allow a particular kind of mortgage loan that no longer falls under AMTPA, it’s possible a state-chartered bank or thrift could still make the loan by relying on a state parity law. Those laws are often found in state banking laws and give state-chartered lenders authority to exercise the same powers as national banks and/or federal thrifts.