Reg Z

Fed Proposed Rule on Mortgage Underwriting Standards under Reg Z

On April 19, pursuant to Section 1411 of the Dodd-Frank Act, the Fed released a proposed rule under Regulation Z requiring creditors to determine a consumer’s ability to repay a mortgage before making a loan and to establish minimum mortgage underwriting standards. The proposed rule provides creditors four options to comply with the “ability-to-repay” requirement of Section 1411: (i) general compliance with underwriting standards; (ii) “qualified mortgages” with creditor protections from liability; (iii) balloon-payment mortgages for rural or underserved areas; and (iv) refinancing of risky “non-standard mortgages” into stable “standard mortgages”. Comments must be submitted by July 22. Fed Release. Proposed Rule.

Fed Rule on Mortgage Escrow Accounts

On February 23, the Fed issued a final rule under Reg Z (TILA) which, pursuant to the Dodd-Frank Act, increases the APR threshold used to determine whether a mortgage lender is required to establish an escrow account for taxes and insurance for first-lien “jumbo” mortgage loans. The Fed also proposed a rule under Reg Z (TILA) that would expand the minimum mandatory escrow period for first-lien mortgage loans from one to five years and would implement new disclosure requirements contained in the Dodd-Frank Act. Comments on the proposed rule must be submitted within 60 days after publication in the Federal Register. Fed Release. Fed Final Rule. Fed Proposed Rule.