The Consumer Financial Protection Bureau (CFPB) announced a final rule amending the ability-to-repay rule that would help nonprofit and community-based lenders finance affordable housing. The amended rule modifies the qualified mortgage requirements enacted in the Dodd-Frank law and largely finalized in a CFPB rule earlier this year. NHC led a coalition of stakeholders to advocate for these provisions with regulators (see the letter from the National Foreclosure Prevention and Neighborhood Stabilization Task Force). The CFPB’s decision finalizes many items advocated by the coalition and represents a strong step forward for affordable housing.
Highlights from the new final rule as summarized by the CFPB (read the final rule on the CFPB web site):
- Exempt certain nonprofit creditors: The final rule exempts from Ability-to-Repay rules certain nonprofit and community-based lenders that work to help low- and moderate-income consumers obtain affordable housing. Among other conditions, the exemptions generally apply to designated categories of community development lenders and to nonprofits that make no more than 200 loans per year and lend only to low- and moderate-income consumers. Similarly, mortgage loans made by or through a housing finance agency or through certain homeownership stabilization and foreclosure prevention programs are exempted from the Ability-to-Repay rules.
- Facilitate lending by certain small creditors: This amendment makes several adjustments to the Ability-to-Repay rule in order to facilitate lending by small creditors, including community banks and credit unions that have less than $2 billion in assets and each year make 500 or fewer first-lien mortgages, as defined in the rule. First, the rule generally extends Qualified Mortgage status to certain loans that these creditors hold in their own portfolios even if the consumers’ debt-to-income ratio exceeds 43 percent. Second, the final rule provides a two-year transition period during which small lenders can make balloon loans under certain conditions and those loans will meet the definition of Qualified Mortgages. The Bureau expects to continue to study issues concerning access to credit and balloon lending by small creditors. Third, the final rule allows small creditors to charge a higher annual percentage rate for certain first-lien Qualified Mortgages while maintaining a safe harbor for the Ability-to-Repay requirements.