The CFPB proposed clarifications and revisions to its mortgage rules on Monday as part of an effort to address concerns raised during the implementation process.
“When we published our mortgage rules, we pledged to be attentive to issues that arose through the implementation process,” CFPB Director Richard Cordray said. “Today’s proposal revises and clarifies certain aspects of our rules to ease implementation and to pave the way for more effective consumer protections in the marketplace.”
The CFPB finalized several mortgage rules in January, including the ability-to-repay/qualified mortgage rule. The mortgage servicing rules implemented protections for homeowners facing foreclosure, and loan originator compensation rules seek to address incentives for lenders to push borrowers into risky or high-cost loans.
Monday’s proposal outlines procedures for obtaining follow-up data on loss-mitigation applications. A servicer must, within five days of receiving a loss mitigation application, acknowledge receipt of the application and notify the borrower of the application’s level of completion.
Servicers are also required, under the revisions, to seek additional information from the borrower if a determination cannot be made without it. Servicers must also ensure that the borrower does not lose certain protections until the borrower has a reasonable amount of time to supply the necessary information.
Additionally, the clarifications would make it easier for servicers to offer short-term forbearance plans to delinquent borrowers who only need temporary relief, not a full loss mitigation evaluation process.
The proposal released on Monday also clarifies how existing definitions of “rural” and “underserved” apply to exceptions under the mortgage rules. For small creditors who do not operate in rural or underserved areas, they are exempt from a ban on high-cost mortgages featuring balloon payments, as long as the loans meet certain restrictions.
For small creditors who do operate in predominantly rural or underserved areas, the proposal revises an exemption from a requirement to maintain escrows on certain high-priced mortgages. To prevent creditors from losing their exemption eligibility for next year, the proposal extends availability to small creditors that qualified in any of the three previous calendar years.
Under the CFPB’s mortgage rules, loan originators are required to meet certain qualifications and are subject to certain compensation restrictions. Monday’s proposal clarifies the circumstances under which a loan originator’s staff acts as loan originators.
The proposal also clarifies what compensation must be counted towards thresholds for points and fees under the QM and high-cost mortgage rules.