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CFPB unveils QM, ability-to-repay rules

tumblr_lhpgme0CMZ1qza3ak1The CFPB announced long-awaited rules on Thursday for qualified mortgages, drawing general praise from consumer advocates and lenders, though some industry participants expressed concern regarding the regulatory impact of the rules.

“With today’s qualified mortgage rule, the CFPB has ensured that most consumers will continue to have access to safe credit,” Frank Keating, the president and CEO of the American Bankers Association, said. “While the rule codifies many conservative lending standards currently in place, it is complex and technical, presenting an additional regulatory burden.”

The rules, which are set to take effect in 2014, protect borrowers from risky loan products, including “interest-only” and “no documentation” loans, that contributed to a surge in delinquencies and foreclosures after the 2008 financial crisis and housing collapse. Under the ability-to-repay rule, lenders will be required to verify and review potential borrowers’ financial records to determine whether the individual will be able to repay their financial obligations, AOL Real Estate reports.

The CFPB rule also provides a legal safe harbor that could limit civil suits against prime qualified mortgage lenders.

“Credit unions have been and continue to be responsible lenders who work to meet their members’ needs with safe and sound products,” Fred Becker, the president and CEO of the National Association of Federal Credit Unions, said, according to Credit Union Times. “The safe harbor is preferable for all parties involved in a mortgage loan transaction as it provides clarity and certainty and consequently discourages frivolous lawsuits, claims or defenses.”

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