Regulation Z

CFPB Proposes New Category of Qualified Mortgages


On August 18, the Consumer Financial Protection Bureau (CFPB) issued a Notice of Proposed Rulemaking (NPRM) to create a new category of qualified mortgage (QM) loans exempt from Regulation Z’s ability-to-repay requirements. The new “Seasoned QM” category would include certain fixed rate, first lien loans that the creditor has held in portfolio for a seasoning period of 36 months and that meet certain performance requirements at the end of such period. The proposal would also permit loans in temporary forbearance as a result of disaster or pandemic-related emergencies to qualify for Seasoned QM status if certain conditions are met. Comments on the proposal will be due 30 days after publication in the Federal Register. Release. NPRM.

Fed Increases Reg Z and Reg M Dollar Thresholds

On June 13, the Fed amended Regulation Z, which implements the Truth in Lending Act, and Regulation M, which implements the Consumer Leasing Act, by increasing the dollar threshold for exempt consumer credit and lease transactions under both regulations from $50,000 to $51,800. These adjustments will be effective on January 1, 2012. Fed Release. Regulation Z Amendment. Regulation M Amendment.

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 Will Not Finalize Reg Z Rulemakings

On February 1, the Fed announced that it does not expect to finalize three pending mortgage lending rulemakings under Regulation Z, which implements the Truth in Lending Act (TILA), prior to the transfer of authority for such rulemakings to the Consumer Financial Protection Bureau in July 2011. Fed Release.

Fed Interim Rule Amending Reg Z

On December 22, the Fed approved an interim rule amending Regulation Z, which implements the Truth in Lending Act (TILA). The interim rule clarifies certain aspects of a September 24, 2010 interim rule in response to public comments. The September interim rule implements provisions of the Mortgage Disclosure Improvement Act which amended TILA to require mortgage lenders to disclose examples of how a loan’s interest rate or monthly payments can change. Those statutory amendments will become effective on January 30. Fed Release.

Reg Z and Reg M Proposals

On December 13, in accordance with the Dodd-Frank Act, the Fed proposed rules to amend Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) to apply to consumer credit transactions and consumer leases of up to $50,000 (up from $25,000), effective July 21, 2011. Comments must be submitted by the later of February 1, 2011 or 30 days after publication of the proposals in the Federal Register. Fed Release. Reg Z Proposal. Reg M Proposal.

Fed Rules Regarding Mortgages

On August 16, the Fed issued proposed, interim and final rules relating to mortgage loans.  The proposed rule revises escrow account requirements for first-lien “jumbo” mortgages.  The interim rule revises disclosure requirements for closed-end mortgages under Regulation Z (Truth in Lending).  The final rules (i) implement a statutory amendment to the Truth in Lending Act requiring that consumers receive notice within 30 days of a sale or transfer of their mortgage and (ii) bar a loan originator from receiving compensation that is based on the interest rate or other mortgage loan terms.  The Fed also proposed enhanced consumer protections and disclosures for home mortgage transactions (including significant changes to Regulation Z) and is seeking comments on this proposal within 90 days after publication of the proposal in the Federal Register. Fed Proposed Rule on Escrow Accounts for Jumbo Mortgages. Fed Interim Rule on Closed-End Mortgages. Fed Final Rule on Notice of Sale or Transfer. Fed Final Rule on Originator Compensation. Fed Proposal and Request for Comment on Consumer Protection and Disclosure.