The CFPB released its updated compliance guide for small firms for its ability-to-repay/qualified mortgage rule that includes clarifications and amendments issued earlier this year.
Revisions included in the compliance guide amend the final rule issued in January that is set to take effect on Jan. 10.
Under the rule, Regulation Z generally prohibits a creditor from making a home loan until the creditor determines that the borrower can repay the loan.
The CFPB amended the rule to provide an exemption to the requirement for certain nonprofit creditors, loans under certain programs, creditors with certain designations and mortgage loans made in connection with certain federal emergency economic programs.
The amended compliance guide also provides an additional definition of a QM for certain loans made and held by small creditors, as well as a transitional definition of creditors eligible to make balloon-payment QMs.
Additionally, the amendments shift the APR threshold for small creditor and balloon-payment QMs from 1.5 percentage points above the average prime offer rate on first-lien loans to 3.5 percentage points above APOR. The requirements for loan originator compensation inclusion in the points-and-fees calculation were also amended, in addition to how eligibility for QMs is determined under a temporary provision allowing QM status for loans eligible for action by Fannie Mae and Freddie Mac.
The amendment also clarifies how debt and income are determined for the purpose of meeting the 43 percent debt-to-income ratio requirement under the QM provision.