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The Consumer Financial Protection Bureau has managed to take one of the most controversial provisions of the Dodd-Frank Act a rule that would effectively redefine the mortgage market and craft it in a way to please both the banking industry and consumer groups.
May 30 -
Community banks and credit unions now have two years to continue originating balloon loans to all customers, a major change from a prior proposal that would have banned such loans except in rural or underserved markets.
May 29
WASHINGTON The Consumer Financial Protection Bureau released exam guidance on Tuesday that details how it plans to enforce its recently released mortgage regulations.
The guidelines lay out what examiners will be looking for when the rules, which include requirements to ensure a borrower has the ability to repay a loan and the creation of an ultra-safe class of loans known as "qualified mortgages," go into effect in January 2014.
"The CFPB recognizes that the easier we make it for financial institutions and mortgage companies to follow the new regulations, the better off consumers will be," CFPB Director Richard Cordray said in a press release. "By releasing details of what our examiners will be looking for well in advance of the effective date of most of the rules, we are giving industry more time to adjust."
The guidance reiterates what's expected of lenders, including proper qualifications for loan originators, a ban on "steering" borrowers into higher-priced mortgages to boost an originator's compensation, and dual compensation where the originator is paid both by the consumer and the creditor.
The guidelines also say how lenders must protect borrowers of subprime loans, prohibit the waiver of consumer rights and ban mandatory arbitration clauses. Additionally, the guidelines say that lenders must provide applicants with free copies of all appraisals and prohibit the financing of certain credit insurance premiums.
