Alternative Mortgage Transaction Parity Reg D

What the is this????

?????????

I know! Someone want to read and then summarize for me? It's Friday and my mind is out of the office!

Below is a summary I found on Wolters Kluwer, not sure if will help at all.

The CFPB has issued an interim final rule establishing Alternative Mortgage Transaction Parity (Regulation D), pursuant to the Alternative Mortgage Transaction Parity Act (AMTPA) and the Truth in Lending Act. According to the bureau, the interim final rule is necessary to avoid a regulatory gap created by the amendments to the AMTPA in the Dodd-Frank Act. Without an interim final rule that takes immediate effect, state housing creditors would no longer be able to make variable rate mortgage loans and other alternative mortgage transactions pursuant to AMTPA in states that prohibit such transactions, thus denying consumers access to that form of credit. Until July 22, 2012, the interim final rule applies only to state housing creditors seeking to invoke federal preemption of state law under AMTPA. The interim final rule will be in place as a temporary measure pending the CFPB's completion of a notice-and-comment rulemaking to promulgate permanent rules, including rules governing alternative mortgage transactions made by federally chartered housing creditors. The CFPB seeks public comment in anticipation of that process; comments must be submitted by Sept. 22, 2011. The interim final rule is effective July 22, 2011.

REQUESTED SUMMARY:

It does not apply to banks - only those entities regulated by the FTC.

The CFPB posted about the rule on its blog. http://www.consumerfinance.gov/preserving-a-level-playing-field-and-access-to-mortgages/

Any new requirements appear to take effect on 12/21/12, and those provision taking effect today are only to prevent a gap in regulation allowing the preemption of State laws inconsistent with Federal allowing certain mortgage transaction types. I read the preamble (didn't have anything better to do..........) because I was concerned we needed to immediately alter our balloon notes/mortgages to include covenants providing for conditional commitments to renew.

Here's some tidbits.

"On July 22, 2012, compliance with § 1004.4 is mandatory for all creditors, except as provided in § 1004.4(d).

[…]

Consistent with the Dodd-Frank Act amendments to AMTPA, the interim final rule’s definition of ‘‘alternative mortgage transaction’’ is limited to transactions in which the interest rate or finance charge may be adjusted or renegotiated. As a result, previously preempted state consumer protection laws will apply to fixed-rate mortgage loans with interest-only payment periods or negative amortization features, fixed-rate balloon loans where the lender does not make a commitment to renew the loan, and certain other fixed-rate products that previously qualified as alternative mortgage transactions but no longer qualify because of the Dodd-Frank Act amendments.

[…]

Renegotiable rate mortgages (also called renewable balloon-payment mortgages) must include a written commitment by the lender to renew the loan, subject to certain limitations. In addition, state housing creditors (like all other creditors) must comply with certain federal underwriting requirements.

[…]

The CFPB has provided a one-year extended compliance period (until July 21, 2012) and a temporary safe harbor for federal housing creditors and for state housing creditors that do not seek
to invoke AMTPA preemption so that these lenders may continue to originate variable rate mortgages and other alternative mortgage transactions in accordance with other sources of law.

[…]

The rulemaking required under Section 1083 therefore effectively requires two components: one establishing standards for federal housing creditors to follow in originating alternative mortgage transactions under other federal consumer financial laws administered by the CFPB; and the other designating those standards as applicable to state housing creditors that seek to invoke federal preemption under AMTPA. Accordingly, the regulations required by Section 1083 impact the mortgage market as a whole, not just a subset of state lenders.

[…]

The CFPB finds that there is good cause to conclude that providing notice and opportunity for comment would be impracticable and contrary to the public interest under these circumstances. The CFPB also finds that there is good cause to issue this rule effective immediately; however, the CFPB is making compliance with the requirements in § 1004.4 optional for certain creditors until July 22, 2012."


12 CFR § 1004.4(b)
(b) Renegotiable rates for renewable balloon-payment mortgages. A creditor that makes an alternative mortgage transaction with payments based on an amortization period and a large final payment due after a shorter term may negotiate an increase or decrease in the interest rate when the transaction is renewed only if the creditor makes a written commitment to renew the transaction at specified intervals throughout the amortization period. However, the creditor is not required to renew the transaction if:
(1) Any action or inaction by the consumer materially and adversely affects the creditor’s security for the transaction or any right of the creditor in such security;
(2) There is a material failure by the consumer to meet the repayment terms of the transaction;
(3) There is fraud or a willful or knowing material misrepresentation by the consumer in connection with the transaction; or
(4) Federal law dealing with credit extended by a depository institution to its executive officers specifically requires that as a condition of the extension the credit shall become due and payable on demand, provided that the creditor includes such a provision in the initial agreement.

b) Renegotiable rates for renewable balloon-payment mortgages. A creditor that makes an alternative mortgage transaction with payments based on an amortization period and a large final payment due after a shorter term may negotiate an increase or decrease in the interest rate when the transaction is renewed only if the creditor makes a written commitment to renew the transaction at specified intervals throughout the amortization period.

3. Examples of transactions that are not alternative mortgage transactions. The following are examples of transactions that are not alternative mortgage transactions:

ii. Balloon transactions with a fixed interest rate where payments are based on an amortization schedule and a large final payment is due after a shorter term, where the creditor does not make a commitment to renew the transaction at specified intervals throughout the amortization period.

This doesn't seem to jibe to me. The first citation seems to mandate that banks with balloon note mortgages must make a written commitment to renew the loan whereas the 2nd citation seems to imply that if the lender does not make a commitment, it simply isn't an alternative mortgage. What am i missing?

??

I'm reviving this one...

I'm so lost on this subject!!!!! Any new developments?

Basically, if you were doing the loans under the preemption, you have to follow state law now?

Unless you are a federal housing creditor or a state housing creditor, it really has no impact on you. The DFA transferred the rule making authority to the CFPB and the CFPB had to issue the rule at the time of transfer in order for these entity to retain State law exemptions. There were very few changes in the law at the time of transfer. The AMTPA has been around since the 80's. If it didn't impact you before, it won't impact you now.

Sweet! Thanks!!!

Okay-now I am confused again. Wouldn't all state chartered banks fall into this category???

Unless you are a federal housing creditor or a state housing creditor, this regulation provides no benefit to you.

O.K., where is the definition of what is a federal versus a state housing creditor...it's not in the rule, which only defines "housing creditor"? I have not been able to find a definitive source which defines either the term "federal housing creditor" or "state housing creditor". Without those definitions, this thread is not helpful.

They would be governmental sponsored entities. If you have to ask, you ain't one. If you are one, you would know.

Sorry to revive this really old thread, but I was hoping for a little more clarification. I just recently found out about this regulation and am trying to determine how it applies. The regulation itself is not real clear in terms of applicability.

The main page of the CFPB regulation says that
"State housing creditors include state-chartered or state-licensed:
NCUA-insured credit unions
FDIC-insured banks
Savings banks
Mortgage lenders meeting certain criteria:

So, it appears as if this applies to state chartered banks and credit unions. Even if it is applicable, maybe there is not much to worry about. It appears as if most of the requirements defer to Regulation Z with only one additional section on balloon loans. Does anyone have any more information they can provide?

All it really does is grant the powers to a State bank that a Federally chartered bank can do. It puts all such banks on "parity".

That makes sense. Thanks.