Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z)
The CFPB amended Regulation Z, which implements the Truth in Lending Act (TILA). Regulation Z currently prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan. The final rule implements sections 1411 and 1412 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.” The final rule also implements section 1414 of the Dodd-Frank Act, which limits prepayment penalties. Finally, the final rule requires creditors to retain evidence of compliance with the rule for three years after a covered loan is consummated.
Along with issuing the rule, we are issuing a concurrent proposal. In addition, this page contains summaries and other resources to help you understand the rule and its implications.
Contents
The rule
We issued the document containing this final rule on January 10, 2013. View the full document as issued.
The Office of the Federal Register published the final rule on January 30, 2013. View the rule as published in the Federal Register.
Effective date
This rule is effective January 10, 2014.
Breakdown of the document’s contents
This document contains the following parts:
- Preamble summarizing why we are issuing the rule, our legal authority, reasoning behind the rule, responses to comments, and analysis of the benefits, costs, and impacts of the rule
- Regulatory text, which, when effective, will amend Regulation Z and can be found on page 638 in the document above
- Official interpretations of the rules which can be found on page 690 in the document above
Detailed summary of the rule
Read the detailed summary to learn more about the background of this rule and how it affects providers of financial products and services.
What this means for consumers
The new rule will go into effect on January 10, 2014. This summary outlines some of the ways we expect it to impact consumers who have residential mortgage loans. Download the consumer summary.
Proposals
Concurrent proposal
The CFPB is proposing to amend Regulation Z, which implements the Truth in Lending Act (TILA). The Dodd-Frank Act requires creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.” The Bureau is proposing certain amendments to the final rule implementing these requirements, including exemptions for certain nonprofit creditors and certain homeownership stabilization programs and an additional definition of a qualified mortgage for certain loans made and held in portfolio by small creditors. The Bureau is also seeking feedback on whether additional clarification is needed regarding the inclusion of loan originator compensation in the points and fees calculation.
View the concurrent proposal here.
You can also view, as individual documents, the concurrent proposal’s preamble, regulatory text, and official interpretations.
Related proposals
On May 11, 2011, the Office of the Federal Register published the following proposed rule issued by the Federal Reserve Board.
On June 5, 2012, the Office of the Federal Register published a a notice reopening the comment period specifically for certain new data and information. That notice, and comments received, are available online: Notice of Reopening of Comment Period to seek comment on certain new data and information submitted during or obtained after the close of the original comment period.
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