CFPB Proposes Additional Revisions to Final Mortgage Rules

On June 24, the CFPB proposed another rule amending certain mortgage rules issued back in January 2013. The proposed amendments focus primarily on clarifying, revising, or amending provisions on:

Related to the loss-mitigation procedures, the proposed revisions address situations where a credit union provides notification to the member that their loss mitigation application is complete and then subsequently learns the application is incomplete and further information is required. The proposal also makes it easier for credit unions to offer short-term forbearance plans for delinquent members who need only temporary relief, without going through the full loss mitigation process.

For those credit unions using the “small creditor” exemption because they operate predominately in “rural’” or “underserved” areas (and meet other criteria), the proposal would extend the availability of the exemption to small creditors that qualified in any of the previous three calendar years (as opposed to just the prior calendar year). This proposal would also extend an exception to the general prohibition on balloon features for high-cost mortgages under TILA to allow all small creditors, regardless of whether they operate predominately in “rural” or “underserved” areas, to continue originating balloon high-cost mortgages if the loans meet the requirements for “qualified mortgages.”

Under the final rule, there was some confusion regarding the application of “loan originator” to front line staff. The CFPB is proposing to remove the requirement that creditor or loan originator contact information must be provided “in response to the consumer’s request” for the exclusion to apply. Additionally, to be eligible for the exclusion, the employee must not, among other things, offer or negotiate “credit terms available from a creditor.”  The CFPB is proposing to revise commentary regarding the meaning of “credit terms” to clarify that any such activity must relate to “particular credit terms that are or may be available from a creditor to that consumer, selected based on the consumer’s financial characteristics,” not credit terms generally.

The proposed rule provides clarification on what constitutes financing of credit insurance premiums by a creditor. Specifically the proposal indicates “the CFPB understands that credit insurance companies have creditors acting as passive conduits, collecting and transmitting monthly premiums from the consumer to a credit insurer, rather than advancing funds to an insurer and collecting them subsequently from the consumer. Under such a scenario, the CFPB believes that a creditor would not likely provide a consumer the right to defer payment of a credit insurance premium or fee owed by the consumer within the meaning of the proposal.” The bureau is requesting comments on the extent to which creditors act other than as passive conduits in a manner that would constitute financing of credit insurance premiums or fees.

The CFPB is also proposing to adjust the effective dates for certain provisions of the loan compensation rules.

The proposed rule can be found here.

Submissions to Monitor may be emailed. Bryan Laviolette is the editor of Monitor. Contact him by email or call (800) 262-6285, ext. 233. The newsletter of the Michigan Credit Union League is published Monday mornings or Tuesday mornings when Monday is a holiday. There is no Monitor the week after Christmas and the week after the Annual Convention and Exposition. The MCUL reserves the right to edit submissions for clarity and space.
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