In an effort to ensure a smooth implementation process, the Consumer Financial Protection Bureau has amended some of its mortgage rules. The changes include an earlier implementation date for the loan origination compensation rule, small creditor exemptions and amendments to the servicing rule.
Several mortgage rules were finalized in January by the CFPB. Then, in June, amendments were proposed to the final rules, which become effective in January 2014.
On Friday, the CFPB issued a final rule for the proposed amendments, which it says will “resolve implementation issues and clear the way for better consumer protections.”
The final rule changes the effective date for some provision to Jan. 1, 2014. The date was moved up to simplify compliance since compensation plans, training, and licensing and registration are often structured on an annual basis.
It also clarifies circumstances when administrative staff acts as loan originators. This was done to address concerns that tellers or other administrative staff could be unintentionally classified as loan originators for engaging in routine customer service activities.
The bureau clarified that credit insurance premiums are considered to be financed when the borrower is able to defer payment of the premium beyond the month that it is due. An explanation is provided about how the rule applies to level monthly premiums that don’t decline with a loan balance.
The regulator clarified when compensation on manufactured housing financing must be counted toward certain thresholds for points and fees under the ability-to-repay and high-cost mortgage rules. Also clarified is when employees of manufactured housing retailers may be considered loan originators.
The servicing rule prohibits servicers from making the first notice or filing under state law during the first 120 days of delinquency. The final rule allows servicer to send some state-required early delinquency notices that might benefit distressed borrowers.
Also covered is how servicers need to notify borrowers about missing loss mitigation application information. In addition, servicers are advised how borrowers are protected during the information gathering period.
Under the final rule, it will be easier for servicers to offer short-term forbearance plans instead of putting borrowers through the full loss-mitigation evaluation process. Six-month forbearance can be provided when an incomplete loss mitigation application is received for borrowers suffering short-term, temporary hardships.
The new rule specifies how to inform borrowers about the address used for error resolution documents by listing it on documents like an initial notice and a periodic statement or coupon book.
While the CFPB is still re-examining the definitions of rural or underserved, the amendments exempt small creditors — including those that don’t predominantly operate in rural or underserved counties — from the new ban on qualified high-cost mortgages featuring balloon payments. They also make it easier for certain small creditors to continue qualifying for an exemption from a requirement to maintain escrows on certain higher-priced mortgage loans.
