The Consumer Financial Protection Bureau (“CFPB”) recently issued a Small Entity Compliance Guide on the Ability-to-Repay and Qualified Mortgage Rule (the “Rule”). The Rule was issued under Dodd-Frank. The Guide provides an overall summary of the Rule and discusses application of the Rule in a Q&A format. The CFPB issued the final rule on January 10, 2013, with an effective date of January 10, 2014.
The Rule generally requires that mortgage lenders make a good faith, reasonable determination of a consumer’s ability to repay most types of closed-end consumer mortgage loans. Certain types of loans such as open-end credit plans, timeshare plans, reverse mortgages, and temporary loans are excluded. The Rule also sets forth a number of standards for a consumer mortgage loan to be considered a “Qualified Mortgage” and therefore qualify for a safe harbor or presumption of compliance with the Rule.