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Legal and Regulatory Updates: April 2015

Matt Drottz
May 18, 2015

USDA-RHA proposes QM Rule for the Single-Family Housing Guaranteed Loan Program (SFHGLP)
On March, 5, the Rural Housing Service (Agency) issued a proposed amendment to the Single-Family Housing Guaranteed Loan Program (SFHGLP). Among the proposed Agency changes to 7 CFR Part 3555 is adding a definition for a qualified mortgage (QM).

Since the implementation of the Consumer Financial Protection Bureau’s (CFPB) QM rules, loans made pursuant to the SFHGLP have been considered QM loans under the temporary QM provisions of CFPB’s QM rules, until those provisions sunset on Jan. 10, 2021, or until the Agency promulgates its own QM rules. The Agency’s proposed rule would specifically define the requirements for a QM loan made under the SFHGLP so that the temporary QM provision would no longer apply.

The Agency proposes defining a QM loan as a guaranteed loan under Part 3555 which meets all Agency requirements, as well as the CFPB’s requirements contained in 12 CFR 1026.43(e)(2)(i) through (iii). Those provisions would require that for a SFHGLP loan to meet the Agency’s definition of a qualified mortgage, the loan term must not exceed 30 years and must contain regular periodic payments that do not result in an increase to the principal balance, and the loan must not allow deferment of payment of the principal or result in a balloon payment. In addition, any Agency QM loan must not exceed the three percent points and fees limitation contained in the CFPB’s standard QM rule.

In order to meet the definition of the QM, there is no separate requirement in the Agency’s proposed rule that the creditor confirms the borrower’s ability-to-repay according to the standard QM rule or meet any prescribed DTI limit.

In addition to defining a QM loan under the SFHGLP, the Agency also proposes to amend current regulations on the subject of lender Indemnification, principal reduction advances and refinancing requirements.

New Jersey increases maximum principal loan amount subject to High-Cost Act for 2015
On Feb. 17, the New Jersey Department of Banking and Insurance published Bulletin Number 15-02, which provides the annual adjustment to the maximum principal amount of a loan that will be subject to the New Jersey Home Ownership Security Act of 2002 (the "Act"). For 2015, the maximum principal amount has been increased to $461,087.86. Loans with principal amounts exceeding this figure will not be subject to the Act's provisions. The revised amount is effective for all completed applications received by a lender on or after Jan. 1, 2015.

CFPB updates TRID implementation materials
The CFPB has updated its TILA-RESPA regulatory implementation materials to bring them into alignment with a rule published Feb. 19, 2015 that modifies the 2013 TILA-RESPA Final Rule. The February 2015 rule extends the timing requirement for revised disclosures when consumers lock a rate or extend a rate lock after the Loan Estimate is provided and permits certain language related to construction loans for transactions involving new construction on the Loan Estimate. Additionally, the CFPB made non-substantive corrections, including citation and cross-reference updates and wording changes for clarification purposes, to various provisions of Regulations X and Z that were amended or adopted by the 2013 TILA-RESPA Final Rule.

This rule also amends the 2013 Loan Originator Final Rule to provide for placement of the Nationwide Mortgage Licensing System and Registry ID (NMLSR ID) on the integrated disclosures. Accordingly, the CFPB also updated the Loan Originator Rule Small Entity Compliance Guide.

Matt Drottz is a compliance analyst with Doc Magic Inc. Matt has more than 12 years of experience in the mortgage industry, with extensive knowledge pertaining to mortgage servicing oversight, risk management and compliance.


This article originally appeared in the April 2015 print edition of National Mortgage Professional Magazine. 

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