Last week, the Consumer Financial Protection Bureau, CFPB, published the final rule on annual adjustments for HOEPA, and the Ability to Repay/Qualified Mortgage provisions of Dodd Frank. These adjustments become effective on January 1, 2015.

In accordance with The Ability to Repay and Qualified Mortgage rule, ATR / QM, the CFPB issued its annual adjustment of points and fees limits for a mortgage to qualify. The Bureau increased these limits as follows:

• the threshold floor amount of mortgages subject to the 3% in points and fees limit went up from $100,000 to $101,953

• the threshold floor amount of mortgages subject to $3,000 in points and fees limit went up from $60,000 to $61,172 and the ceiling amount for these mortgages when up from $100,000 to $101,953. The $3,000 points and fees limit went up to $3,059

• the threshold floor amount of mortgages subject to 5% in points and fees limit went up from $20,000 to $20,391 and the ceiling amount for these mortgages when up from $60,000 to $61,172

• the threshold floor amount of mortgages subject to $1,000 in points and fees limit went up from $12,500 to $12,744 and the ceiling amount for these mortgages when up from $20,000 to $20,391. The $1,000 points and fees limit went up to $1,020

• the threshold ceiling amount of mortgages subject to 8% in points and fees limit went up from $12,500 to $12,744

In accordance with the Homeownership and Equity Protection Act, HOEPA, the CFPB issued the annual adjustment of the dollar amount threshold used to determine whether a mortgage transaction falls under the High Cost Mortgage definition. The Bureau increased these limits as follows:1

• the threshold amount of mortgages subject to the 5% in points and fees limit went up from $20,000 to $20,391

• the threshold amount of mortgages subject to the 8% in points and fees limit went up from $1,000 to $1,020

Loans that meet these points and fees limits fall under the Qualified Mortgage definition, and loan originators/lender are granted safe harbor. This means that whenever a borrower defaults in his/her loan, Housing Agencies and Regulators presume the originator followed through the Ability to Repay checklist and only offered products the borrower could afford. When a mortgage is subject to points and fees amounts that exceed the limit thresholds,it is considered a High-Cost Mortgage, HCM. When issuing a HCM, the originator/lender is required to disclosed detailed information that explains to the borrower he/she is getting a HCM and get certification from a housing counselor that the borrower has received counseling about the particular HCM the lender offered.

1) http://www.cfpbmonitor.com/2014/08/18/cfpb-publishes-annual-card-act-hoepa-and-qm-adjustments/

2) http://www.gpo.gov/fdsys/pkg/FR-2014-08-15/pdf/2014-18838.pdf

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