Effective Date: January 10, 2014
This final rule amends Regulation Z (Truth in Lending) by expanding the types of mortgage loans that are subject to the protections of the Home Ownership and Equity Protections Act of 1994 (HOEPA), revising and expanding the tests for coverage under HOEPA, and imposing additional restrictions on mortgages that are covered by HOEPA, including a pre-loan counseling requirement. The final rule also amends Regulation Z and Regulation X (Real Estate Settlement Procedures Act) by imposing certain other requirements related to homeownership counseling, including a requirement that consumers receive information about homeownership counseling providers.
On September 13, 2013, the CFPB issued a Final Rule amending several provisions of Regulations B, X, and Z scheduled to take effect in January 2014. Some of the updates related to the HOEPA Final Rule include:
- Clarification and revision of the definition of points and fees for purposes of the qualified mortgage points and fees cap and the high-cost mortgage points and fees threshold.
- Extending the exception to the general prohibition on balloon features for high-cost mortgages under § 1026.32(d)(1)(ii)(C) to allow all small creditors, regardless of whether they operate predominantly in “rural” or “underserved” areas, to continue originating balloon high-cost mortgages if the loans meet the requirements for qualified mortgages under §§ 1026.43(e)(6) or 1026.43(f).
On October 15, 2013, the CFPB issued an Interim Final Rule clarifying which mortgage disclosures must be reviewed during the counseling required for high-cost mortgage loans. Under the high-cost homeownership counseling provisions in Regulation Z, a certain subset of closed-end mortgages will not receive RESPA disclosures because they are not subject to the Act (typically manufactured housing with no real property) and would also not receive open-end disclosures under Regulation Z. In those cases, the interim rule clarifies that only the high-cost mortgage disclosure required under Section 32 of Regulation Z must be reviewed during the counseling process (which may present counseling timing challenges since that disclosure is required only three days prior to closing).
On November, 8, 2013, the CFPB issued guidance for lenders on how to comply with the new requirement to provide housing counseling agency information to mortgage loan applicants. The Interpretive Rule and Summary instruct lenders on how they can comply with the requirement to provide a list of HUD-approved housing counseling agencies, including the required list format and data. For lenders that intend to comply with the rule by generating an independent list, the CFPB issued a Guidance Bulletin explaining an interim path toward compliance that lenders can follow as they incorporate the list instructions into their technology systems.