CFPB Readies New Mortgage Rules as Banks Seek More Time
January 7, 2013
Banks such as PNC Financial Services Group Inc. and SunTrust Banks Inc. are asking the U.S. Consumer Financial Protection Bureau (CFPB) to give them a year to satisfy new mortgage underwriting rules. The rules, which require lenders to ensure a borrower’s ability to repay, will be announced in connection with a Jan. 10 hearing in Baltimore. The qualified mortgage rule, required under the 2010 Dodd-Frank Act, is intended to tighten the lax underwriting that contributed to the housing bubble and help protect consumers from unaffordable mortgages. The rules will require lenders to make efforts that include verifying income and assets and will provide lenders some protection from lawsuits. Seven regional banks have asked the CFPB that the rules be “sequenced” to minimize disruptions to the mortgage market. Dodd-Frank requires qualified mortgage rules and some of the servicing rules to be finalized by Jan. 21, 2013. Under the qualified mortgage rule that the CFPB discussed with other agencies, loans to borrowers whose debt was greater than 43 percent of income or who had non-prime interest rates would fall under a legal standard that gives borrowers or bondholders greater latitude to sue if a lender failed to sufficiently gauge repayment ability.
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