The Consumer Financial Protection Bureau (“CFPB”) is required to annually calculate the dollar amounts for several provisions in Regulation Z. 

The CFPB recently issued a final rule amending the dollar amount thresholds under the HOEPA “points and fees” provisions of Regulation Z (12 CFR § 1026.32))a)(1)(ii)), referred to as “Section 32” by the industry, and the qualified mortgage “points and fees” provisions under Regulation Z (12 CFR § 1026.43((e)(3)(i)) based on the annual percentage change provided in the Consumer Price Index (CPI-U) in effect on June 1, 2021. Starting this year, the CFPB is also updating the loan amount thresholds for the APOR, price-based limits.

The threshold adjustments will be effective Jan. 1, 2022.

HOEPA Points and Fees Thresholds

The adjusted HOEPA points-and-fees dollar trigger for high-cost mortgages in 2022 will increase from $1,103 to $1,148. Additionally, the total loan amount threshold used to determine whether a loan is subject to the “total points and fees” provision of HOEPA, or Section 32 will increase from $22,052 for 2021 to $22,969 for 2022.

The fee-based trigger is used to determine whether the total points and fees payable by the consumer at or before loan closing subjects that loan to Section 32. Section 32 applies, in part, to certain loans if the total points and fees payable by the consumer at or before loan closing exceed the greater of eight percent (8%) of the total loan amount or a dollar amount threshold.

In addition to the Federal Section 32 test, this annual adjustment applies to the following state high cost tests: Colorado, Illinois, Maryland, Massachusetts, Oklahoma, Pennsylvania, Texas, and Utah. Please click here for more information.

To see DocMagic’s memorandum regarding HOEPA determination, please see Section 32 High Cost Calculation.

Qualified Mortgage Points and Fees Thresholds

The final rule updates the dollar amount thresholds for determining whether a loan is a qualified mortgage (“QM”) under the “points and fees” provision specified in Regulation Z (12 CFR § 1026.43(e)(3)(i)).

Qualified Mortgage APOR Price-Based Limits

In addition, to satisfy the General QM loan definition effective on March 1, 2021, the APR may not exceed the average prime offer rate for a comparable transaction as of the date the interest rate is set by the following amounts:

Related Content:

• U.S. Treasury and FHFA suspend provisions of the PSPAs (10/20/2021)
• CFPB publishes analysis of consumer complaints (10/13/2021)
• FHFA to eliminate the adverse market refinance fee (8/4/2021)

The U.S. Treasury and the Federal Housing Finance Agency (“FHFA”) recently announced the suspension of certain provisions of the Preferred Stock Purchase Agreements (“PSPAs”) which govern the conservatorship of Fannie Mae and Freddie Mac (the “GSEs”). The provisions, which went into effect on Jan. 14, 2021 under the outgoing former FHFA Acting Director, Mark Calabria, placed several restrictions on the GSEs’ activities.

One of the suspended restrictions is a 7% volume cap on the total acquisition of single-family mortgages secured by second homes or investment properties that includes a 52-week look-back period. In response to the suspension, Freddie Mac retired sections 4201.15 and 4501.16 of the Freddie Mac Single-Family Seller/Servicer Guide that limited its acquisition of single-family mortgages with these property types. 

Multifamily lending volume caps were also removed along with restrictions on the use of cash windows by lenders (loans acquired for cash consideration) and loans with multiple risk factors.  

Expected to last for at least one year, the suspension will provide “FHFA time to review the extent to which these requirements are redundant or inconsistent with existing FHFA standards, policies and directives that mandate sustainable lender standards,” said FHFA Acting Director Sandra L. Thompson. FHFA plans to consult with the U.S. Treasury regarding the review of the PSPA requirements and on any recommended revisions.

The suspension of the provisions does not affect the GSEs’ ability to retain all their earnings under the FHFA’s Enterprise Regulator Capital Framework Rule finalized in November 2020. However, the FHFA’s recent announcement states that it will be reviewing the GSE’s Regulatory Capital Framework and “expects to announce further action in the near future.”

Related Content:

• CFPB publishes analysis of consumer complaints (10/13/2021)
• FHFA to eliminate the adverse market refinance fee (8/4/2021)
• FHFA director replaced following Supreme Court decision (7/6/2021)

The Consumer Financial Protection Bureau (“CFPB”) recently published “Consumer complaints throughout the credit life cycle, by demographic characteristics,” an analysis that looks at various demographic and socio-economic characteristics of consumers that submitted complaints during the three-year time period of 2018 to 2020.

The CFPB states that through its analysis, which includes mapping complaints to a credit life cycle (loan origination, servicing of performing loans, delinquent servicing and credit reporting), it is possible to get a broader understanding of consumers’ financial experiences, rather than just looking at individual complaint submissions. The analysis looks at consumer non-public identifying information in relation to 2019 U.S. Census tract data from the American Community Survey. By looking at tract data, the analysis is able to provide community-level information about where consumer complaints are more prevalent and how that relates to demographic characteristics.

One of the key findings from the report is that lower income census tracts, and census tracts with a greater concentration of minority populations, are associated with greater rates of submitting credit reporting complaints and delinquent servicing complaints. In contrast, higher income census tracts were found to submit a greater share of complaints about loan origination and performing servicing than lower income census tracts.

The analysis also notes that since the CFPB was created in 2011, it has received more than 3 million consumer complaints, and that more than a quarter of those complaints were submitted after the beginning of the COVID-19 pandemic. Since March 2020, the largest increase in complaints has been in the category of loan origination, which correlates to an industry-wide increase in the number of refinance loans.

Related Content:

• CFPB report finds several mortgage-related violations in 2020 (7/20/2021)
• Fannie Mae and Freddie Mac announce changes to uniform instruments (8/11/2021)
• CFPB rescinds 7 pandemic-related policy statements (4/7/2021)

The U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA) (collectively, the “Agencies”) recently entered into a collaborative agreement regarding the enforcement of fair housing and fair lending requirements.

The Agencies published a Memorandum of Understanding (MOU) that formalizes the sharing of information, resources, coordination of existing and potential investigations, and ongoing monitoring of Fannie Mae, Freddie Mac and the 11 Federal Home Loan Banks (collectively, the “Enterprises”) regulated by FHFA.

HUD Secretary Marcia L. Fudge said that the agreement between the Agencies “is an important and historic step to advance and strengthen the enforcement of our nation’s fair housing and fair lending requirements.”

The MOU provides that communication will be organized by liaisons from each agency who will arrange meetings to share information and discuss coordinated efforts on fair housing and fair lending matters related to the Enterprises. Each agency will provide the other with a periodic digest of information on complaints accepted for filing under the Fair Housing Act or consumer complaints that may constitute a violation of the Fair Housing Act.

The MOU states that the purpose of the agreement is to promote an interagency coordination that enhances oversight of the Enterprises, while reducing duplicate enforcement efforts by the Agencies. In addition to compliance reviews, the Agencies will coordinate activities related to fair lending examinations and review of the Enterprises’ underwriting and appraisal guidelines.

The MOU provides that information shared between the Agencies can be classified as confidential and names Data Custodians that are responsible for safeguarding the information and meeting the requirements of sharing data under the agreement. 

The MOU is set to continue through Dec. 31, 2025, at which time the Agencies may renew the agreement, let it expire, or create a new agreement. Either agency can terminate the MOU at any time by providing a 30-day written notice to the other agency.

Related Content:

• Fannie Mae and Freddie Mac announce changes to uniform instruments (8/11/2021)
• FHFA to eliminate the adverse market refinance fee (8/4/2021)
• CFPB report finds several mortgage-related violations in 2020 (7/20/2021)

On July 7, 2021, Fannie Mae and Freddie Mac (the GSEs) announced changes to all uniform instruments, except those being retired — including notes, riders, security instruments, addenda and special-purpose documents.

Fannie Mae's and Freddie Mac's websites will continue to provide both the current versions of the uniform instruments and the updated versions, which have a July 2021 footer date. The announcements provide that the updated uniform instruments may be used now but will only be mandatory for loans with a note date on or after the effective date of Jan. 1, 2023. An 18-month transition period was provided to allow the industry time to prepare for the transition.

The updated uniform instruments cannot be used in any combination with earlier versions. For instance, if a July 2021 security instrument is used, the applicable July 2021 note must also be used.

Fannie Mae’s Selling Guide Update (SEL-2021-06) states that the changes to the uniform instruments were made to “enhance clarity and usability.” Fannie Mae has posted the updated versions of the documents and a Uniform Instrument Update Fact Sheet to their web page. The fact sheet states that the updates are the result of a comprehensive review in collaboration with Freddie Mac.  

Freddie Mac has a new 2021 Uniform Instruments web page which provides a list of affected documents and authorized changes. The Single-Family Seller/Servicer Guide also includes the updates in Exhibit 4A and 5A. The prior Exhibits 4 and 5 will be retired after the new effective date.

DocMagic is currently reviewing changes to the new uniform instruments and will provide additional information regarding a timeline for implementation in a future update.

Related Content:

• FHFA to eliminate the adverse market refinance fee (8/4/2021)
• CFPB report finds several mortgage-related violations in 2020 (7/20/2021)
• FHFA director replaced following Supreme Court decision (7/6/2021)

The Federal Housing Finance Agency (FHFA) announced that the Adverse Market Refinance Fee of 50 basis points (0.500%) will be eliminated for loans delivered to Fannie Mae and Freddie Mac (the GSEs), effective Aug. 1, 2021.

As previously reported by DocMagic, the Adverse Market Refinance Fee was announced in August 2020 and implemented by the GSEs for most refinance mortgages above $125,000 in December 2020. The GSEs advised at the time that the new fee was necessary to manage risks and forecasted losses that would result from the COVID-19 pandemic.  

However, the pandemic did not bring about the losses that were expected as the GSEs have continued to post gains throughout the pandemic. Also, in April 2021, the GSEs reported that the COVID-19 forbearance rate was down to 2%, from a high of approximately 5% in mid-2020. The FHFA announcement states that the “COVID-19 policies reduced the impact of the pandemic and were effective enough to warrant an early conclusion of the Adverse Market Refinance Fee.”

FHFA’s recently appointed Acting Director, Sandra L. Thompson, stated that “the COVID-19 pandemic financially exacerbated America’s affordable housing crisis. Eliminating the Adverse Market Refinance Fee will help families take advantage of the low-rate environment to save more money.”

Related Content:

• CFPB report finds several mortgage-related violations in 2020 (7/20/2021)
• FHFA director replaced following Supreme Court decision (7/6/2021)
• GSE guidance for revised General QM definition (6/7/2021)

Mortgage servicers committed several Regulation X violations in 2020, according to a recent report by the Consumer Financial Protection Bureau (CFPB).

“Today’s release of Supervisory Highlights reinforces the importance of the Bureau’s supervisory work, including during the COVID-19 pandemic, to find and correct systemic problems that hurt consumers,” said CFPB Acting Director Dave Uejio.

The report, which was released June 29, didn’t name any lenders/servicers or levy any penalties, although prior CFPB supervisory findings led to more than $124 million in consumer remediation and civil money penalties in 2020.

The CFPB report covered several areas under its jurisdiction — including debt collection, payday lending and more — as well as mortgage origination, servicing and fair lending. The Bureau highlighted mortgage foreclosure issues in particular.

CFPB examiners found that several mortgage servicers violated Regulation X, which requires lenders to provide borrowers with timely disclosures on the nature and costs of the real estate settlement process.

One key violation was that some servicers made the first notice or filing for foreclosure when it was still prohibited. In some instances, servicers filed for foreclosure before they had evaluated borrowers’ appeals, and in others they engaged in “a deceptive practice” when they informed borrowers that they wouldn’t initiate a foreclosure action until a specific date, only to do so before that date.

“The inaccurate representations regarding the day foreclosure action would be initiated were likely to mislead borrowers into believing that they had more time until foreclosure than they actually did,” the report stated.

CFPB examiners also found some lenders ran afoul of Regulation Z by compensating loan originators differently based on whether the loan was a Housing Finance Agency (HFA) loan or construction loan.

Additionally, several lenders reported inaccurate data, putting them in violation of the Home Mortgage Disclosure Act (HMDA) and Regulation C, which requires financial institutions to collect and report loan application data.

The American Land Title Association (ALTA) also noted that the report found some lenders are in violation of Regulation Z due to inaccurately disclosing fees for lender’s title insurance on the TILA-RESPA Integrated Disclosures.

For more information, read the report.

Related Content:

• FHFA director replaced following Supreme Court decision (7/6/2021)
• GSE guidance for revised General QM definition (6/7/2021)
• CFPB rescinds 7 pandemic-related policy statements (4/7/2021)

On June 23, 2021, the U.S. Supreme Court issued a 7-2 decision in Collins v. Yellen, which held that the structure of the Federal Housing Finance Agency (FHFA) was unconstitutional in that Congress overstepped its authority by placing a single director in charge of the agency that could only be removed for cause. 

Under the Housing and Economic Recovery Act of 2008, Congress placed Fannie Mae and Freddie Mac into conservatorship overseen by a new federal agency, the FHFA. The agency was created with a single director, who is appointed by the president and confirmed by the Senate to serve a five-year term. Once appointed, the head of the agency could only be removed by a president for cause, which the decision states is not the same as “at will.” The Supreme Court ruled that the restriction on the president’s ability to remove the agency director violates the Constitution’s basic principle of separation of powers. 

Writing for the majority, Justice Samuel Alito states that the agency’s leadership structure “clashes with constitutional structure” by “concentrating power in a unilateral actor insulated from Presidential control.” Justice Alito also referred to the Supreme Court decision in the last term which struck down similar restrictions on the president’s ability to remove the head of the Consumer Financial Protection Bureau (CFPB), stating that “the Constitution prohibits even ‘modest restrictions’ on the President’s power to remove the head of an agency with a single top officer.”

The Supreme Court decision also ruled against a group of shareholders on a statutory claim that the FHFA exceeded its authority by agreeing to a new variable dividend formula referred to as the “net worth sweep.” The court is allowing the shareholders to go back to the lower courts to agree whether the unconstitutional restriction on removal of the director led to compensable harm.

Following the decision, the White House released a statement advising that the Biden administration would replace FHFA Director Mark Calabria, a Trump appointee, with a director “who reflects the Administration’s values.” Calabria announced his resignation, and within hours, Sandra L. Thompson was appointed as Acting Director, effective immediately. Thompson has been at the FHFA since 2013, serving as the Deputy Director of the Division of Housing Mission Goals, and overseeing housing and regulatory policy, capital policy, financial analysis, and fair lending activities. Prior to the FHFA, Thompson worked for the Federal Deposit Insurance Corporation for 23 years in various leadership roles. In a statement released by the FHFA, Thompson said, “There is a widespread lack of affordable housing and access to credit, especially in communities of color. It is FHFA’s duty through our regulated entities to ensure that all Americans have equal access to safe, decent, and affordable housing.”

DocMagic will continue to monitor agency announcements for any further developments.

Related Content:

• GSE guidance for revised General QM definition (6/7/2021)
• GSEs announce plans to limit purchases to loans meeting revised General QM rule (5/11/2021)
• CFPB rescinds 7 pandemic-related policy statements (4/7/2021)

Fannie Mae and Freddie Mac (FNMA or FHLMC, respectively, or the “GSEs” collectively) recently provided additional guidance on their changes in response to the revised General QM definition, as well as their Preferred Stock Purchase Agreement (“PSPA”) with the Federal Housing Finance Agency (“FHFA”).  

As we discussed in our prior article last month, “GSEs announce plans to limit purchases to loans meeting revised General QM rule,” the GSEs have entered into a Preferred Stock Purchase Agreement with the FHFA which requires the GSEs to only accept for purchase those loans meeting the new, revised General QM definition as of its original mandatory compliance date on July 1, 2021.  The CFPB has since officially postponed the mandatory compliance date of the new rule to October 1, 2022, as discussed here.  

The new guidance released by the GSEs last week reiterates their previously announced position, that due to the terms of the PSPA with the FHFA, only loans meeting the new definition of General QM will be accepted for purchase, as of loans with an application date of July 1, 2021 or after, or with a settlement date after Aug. 31, 2021, no matter the loan’s application date. Effectively, this means there will be no “GSE Patch” or Temporary Agency carve out to the General QM rule as of these dates, and all loans with an application date of July 1 or later will be expected to comply with the new General QM definition. 

Note, the GSE Patch to the prior General QM definition allowed loans eligible for sale to the GSEs to meet the General QM definition up until the sunset date (prior date was Jan. 10, 2021, then modified to match the new mandatory compliance date of the new General QM rule), or when the GSEs left conservatorship, whichever was later. However, since as of applications dated July 1, the GSEs will only purchase loans meeting the new General QM definition, then effectively, those loans are the only ones eligible for sale to the GSEs thus the only loans meeting the GSE patch rules as well. As a result, effectively, because of the GSEs' actions, there will no longer be any GSE patch as of July 1 (or Sept. 1 for loans with application dated before July 1 but not yet sold to the GSEs). 

One exception to the new GSE requirements is for construction-to-permanent loans which may be delivered under the prior QM definition until Feb. 28, 2022 (for loans with an application date prior to July 1, 2021).

As a result, DocMagic is proceeding with our original plans for phasing out the QM rules that allow for the GSE Patch/Temporary Agency QM. Thus, for loans with an application date of July 1 or later, DocMagic audits will run only the revised General QM definition, without a DTI component. As of Sept. 1, DocMagic Online will no longer allow selection of Temporary Agency rules for loans with an application date of July 1, and any transaction submitting a QM Type: TemporaryAgency, will automatically have the new General QM rules applied instead. Users will still be able to run the Temporary Agency rules on loans with an application date prior to July 1. 

Fannie Mae Lender Letter 2021-11

Freddie Mac Bulletin 2021-19

Related Content:

• GSEs announce plans to limit purchases to loans meeting revised General QM rule (5/11/2021)
• CFPB rescinds 7 pandemic-related policy statements (4/7/2021)
• CFPB issues statement on financial institutions serving LEP customers (2/3/2021)

On April 27, 2021, the CFPB formally announced the delay of the mandatory compliance date of the General Qualified Mortgage (QM) Final Rule from July 1, 2021 to Oct. 1, 2022. The General QM Final Rule removes the requirement that a consumer’s debt-to-income (DTI) ratio cannot exceed 43% and creates a “price-based limit.” Until the mandatory compliance effective date, the CFPB is allowing creditors to follow either the General QM loan definition in effect before March 1, 2021 or the revised Final Rule. The temporary GSE QM loan definition, or “GSE Patch,” which allows loans for sale to Fannie Mae or Freddie Mac (the "GSEs") with a DTI exceeding 43% is also available to creditors until the mandatory compliance date or until the GSEs exit federal conservatorship.

In January 2021, the GSEs entered into an agreement with the Department of Treasury that made changes to the Amended and Restated Preferred Stock Purchase Agreement (the “PSPA”). Under the PSPA, the GSEs will no longer be able to purchase loans that do not meet the CFPB’s revised General QM loan definition set forth in 12 CFR 1026.43(e)(2).

On April 8, 2021, Fannie Mae issued Lender Letter 2021-09 and Freddie Mac issued Bulletin 2021-13 to announce that under the PSPA, loans originated under the prior General QM definition (Appendix Q) will no longer be eligible for purchase. Loans originated under the GSE Patch will only be eligible for purchase if the requirements of the revised General QM loan definition are also met. The changes are effective for loans with an application date of July 1, 2021 or later, and for all loans with settlement dates after Aug. 31, 2021. Therefore, even if the CFPB extends the mandatory compliance date for the General QM Final Rule beyond July 1, 2021, most lenders will need to originate loans that meet the new definition. The GSEs will be releasing additional notices announcing guideline and policy changes.

The amendments exclude government loans that otherwise meet QM requirements, including Section 184 Native American Mortgages and Section 502 GRH Mortgages, which will continue to be eligible for purchase under an FHFA exception.

DocMagic has released a new QM audit that compares the Annual Percentage Rate (APR) to the applicable Average Prime Offer Rate (APOR) and determines if the APR exceeds the price-based limitation threshold. The audit will run concurrently with the previous QM audits until Sept. 1, 2021.

Effective Sept. 1, 2021, DocMagic will be removing options related to the previous General QM definition, including QM audits for DTI and the field for QM DTI Ratio. Additionally, DocMagic will be removing the Temporary Agency/GSE option for QM Type and the GSE Type. Any data received for using the Temporary Agency/GSE options will be routed to the General QM Type.    

Related Content:

• CFPB rescinds 7 pandemic-related policy statements (4/7/2021)
• The new URLA: The No. 1 thing you need to do to ensure you're ready (2/7/2021)
• CFPB issues statement on financial institutions serving LEP customers (2/3/2021)