The Consumer Financial Protection Bureau has announced year-long plans for guiding the mortgage industry's compliance with new consumer protection rules that go into effect in January 2014.
Under the Dodd-Frank Act, the CFPB was required to issue new mortgage rules by Jan. 21, 2013. Having met that deadline it has established a January 1, 2014 deadline for the industry to comply. Among the new mortgage rules is an "ability-to-repay" rule, which requires that lenders make a “reasonable, good faith determination” that prospective borrowers have the ability to repay their mortgage. The rule also protects borrowers from risky lending practices, such as underwriting loans based only on low introductory “teaser” interest rates. New mortgage servicing rules address appraisals, escrow accounts, protections for high-cost mortgages, and compensation and qualifications for loan originators.
In an effort to support rule implementation and ensure that the mortgage industry is ready for the new rules, the CFPB will:
- Coordinate with other federal government regulators that also conduct examinations of mortgage companies to ensure all regulators have a shared understanding of the new rules.
- The Bureau will publish, plain-language, easy-to-understand summaries of the regulations in both written and video form. The guides, available in the spring, will be targeted to smaller businesses with limited staff for compliance.
- Over the next year, the CFPB plans to issue updates of “official interpretations,” that provide guidance on how to comply with the new rules and address questions raised by the industry and consumer groups. The Bureau expects to issue the first interpretation in the spring and issue additional updates, as needed.
- Readiness guides, available this summer, are intended to help mortgage originators and servicers prepare for compliance by offering check-lists for implementation plans, revising policies and procedures, and finalizing training initiatives. In-depth examination procedures are expected to be published later this year by the Federal Financial Institutions Examination Council to assist with self-assessments and internal reviews of readiness and compliance.
- As the January 2014 deadline approaches, a consumer education campaign will be launched.
More information about the CFPB's new mortgage rules are available online.