CFPB Continues To Finalize Elements Of 'Points And Fees' Test As Implementation Date Draws Closer

The CFPB's final ability-to-repay rule (Rule), issued January 10, 2013, implements Dodd-Frank mortgage reforms requiring creditors to make good faith determination that a consumer has reasonable ability to repay his or her home loan before the loan is extended. The CFPB provided certain protections from liability under this requirement for loans that meet the criteria to be a "qualified mortgage." A key requirement of a qualified mortgage is that the transaction's "points and fees" generally cannot exceed 3% of the total loan amount. Concurrent with its final Rule, the CFPB issued a proposed amendment regarding loan originator compensation, as the CFPB was still grappling with how to address that element in the final rule.

A recent amendment to the Rule finalizes the element of loan originator compensation for the purposes of the points and fees calculation. Under the revised Rule, compensation mortgage brokers or creditors pay to individual loan originator employees does not count towards the points and fees threshold. However, the CFPB confirmed that compensation a creditor pays to a mortgage broker must be included in points and fees, in addition to any origination charges a consumer pays to a creditor.

Under another proposed amendment, which is currently pending, the CFPB would clarify the treatment of charges paid by parties other than the consumer for the purposes of the points and fees test. First...