Where can I find a summary of the new Reg Z ability to repay rules?

What new rules?

Bureau reopens comment period on 5/11/11 FRB proposal relating to “ability to repay” and minimum mortgage underwriting standards. New comment deadline 7/9/12. Under Reg Z?

There has been no final rules published, so are you just interested in the proposed rules?

BOL Top Stories 5/11/11

Fed Publishes Reg. Z Proposal
The Federal Reserve Board has published its previously announced proposal to amend Regulation Z to require creditors to determine a consumer's ability to repay a mortgage before making a consumer mortgage loan and would establish minimum mortgage underwriting standards. The proposed amendments [TXT; PDF], which implements the Truth in Lending Act (TILA), are being made pursuant to the Dodd-Frank Act. The proposal would apply to all consumer mortgages (except home equity lines of credit, timeshare plans, reverse mortgages, or temporary loans). As noted earlier, the comment period on the proposal closes on July 22, 2011, the day after the Dodd-Frank Act Transfer Date, which means that final action on the proposal must be taken by the Consumer Financial Protection Board (CFPB).

rlcarey, yes I assume they are proposed rules. I recently attended a lending compliance seminar where this proposal was mentioned.

They'll have to finalize them at some point, because the ability to repay rules are what the definition of "qualified mortgage" will come from and a lender will need to know if a loan is or is not a qualified mortgage in order to determine (if other criteria are met) whether or not the loan it is making is a high-risk mortgage loan and thus will require compliance with the proposed new Reg Z appraisal requirements for those types of loans. They won't be able to piecemeal this stuff because there are too many interrelationships.

The QM definition is a major bone of contention, and the ABA (among others) has been hammering away at the CFPB in an attempt to make the definition as broad as possible. There are concerns that drawing the definition too narrowly will throw ice water on an already cool mortgage market.

Thanks for the input Mary Beth & John.

Oops! Forgot to include a link to the summary!
http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20110419a1.pdf

Thanksk Mary Beth, exactly what I needed.

I was trying to point you in the right direction, but the links didn't come over with the copy and paste - should have just linked the page.

Thanks

Need some help regarding the closed-end, consumer RE balloon loans my bank currently makes.

Small community bank, no secondary market loans but we oftentimes make HE Term Loans (usually to term out a HELOC) which are written with balloon payments ranging from a 1 year to a 5 year maturity (on a 15-yr amortization). They are typically subordinate lien transactions.

Under the pending QRM/QM rules, am I reading it correctly that unless I'm in a rural or underserved area (which I'm not), I will not be able to make any type of balloon loan if I want to stay within the safe harbor? I read the Fed recap attached to this thread and am still confused. At first I thought I had 4 option to choose from. I thought great, I'll choose option 1, obtain/verify all of the listed items and I'm good to go. But in reading further I am now confused.

Bottom line, can anyone tell me (if the proposal were to go through as written):

1) Will I still be able to make any type of balloon loan (and not have to worry about their ability to repay the balloon) AND still receive a safe harbor? Like what I currently do for HPML loans

2) What if the balloon were due in a longer time frame beyond 5 years?

I've tried reading everything I can get my hands on about this but it only confuses me more. UGH!

Bump