The CFPB has amended Regulation Z and the commentary to the regulation with respect to mortgage servicer obligations.  The amendments implements the sections of the Dodd-Frank Act addressing the following:

• Initial rate adjustment notices for adjustable-rate mortgages;
• Periodic statements for residential mortgage loans;
• Prompt crediting of mortgage payments; and
• Responses to requests for payoff amounts.

This final regulation also amends current rules governing the scope, timing, content, and format of disclosures to consumers regarding the interest rate adjustments of their variable-rate transactions.

Effective Date: January 10, 2014.

Cross-Reference(s): Dodd-Frank Sections 1418 (“Six-Month Notice Required before Reset of Hybrid Adjustable Rate Mortgages”), 1420 (“Disclosures Required in Monthly Statements for Residential Mortgage Loans”), and 1464 (“Truth in Lending Act Amendments”).

Click here to view rule release in full (links externally to CFPB website).
See also: Text of regulatory amendment only; Official interpretations only; Mortgage Servicing under the Truth in Lending Act (Reg Z) as proposed (77 FR 57317).

The CFPB has proposed to amend Regulation Z, which implements the Truth in Lending Act (“TILA”).  As amended by Dodd-Frank, TILA requires mortgage lenders to make “reasonable, good faith determinations” that customers are able to repay loans, and establishes minimum requirements for making such determinations. The CFPB has proposed amendments to Regulation Z that would provide certain exceptions from these requirements, including exemptions for certain nonprofit creditors and certain homeownership stabilization programs, as well as an additional definition of a “qualified mortgage” for certain loans made and held in portfolio by small creditors. 

The CFPB is also seeking feedback on whether additional clarification is needed regarding the inclusion of loan originator compensation in the points and fees calculation.

Comments Due: Comments generally must be received on or before February 25, 2013.

Lofchie Comment:  The exceptions raise interesting policy questions; e.g., according to the release, the exceptions are necessary because the requirements raise costs, which could make consumer credit less available. It will eventually be interesting to see the results of the exceptions, many of which involve some government assistance. If the exceptions prove to result in higher mortgage default rates, does that mean that the exceptions should be withdrawn?

Click here to view rule release in full.
Related News Item: CFPB Issues ”Ability-to-Repay” Final Rule Regarding Mortgage Lending.

The European Securities and Markets Authority and the European Banking Authority have published the outcome of their joint review of Euribor, setting out recommendations for the rate-setting process which address a number of issues with the governance of the Euribor rate-setting mechanism. 

The recommendations include, among other items:

• focusing references on maturities with the highest usage and volume of underlying transactions; and
• diversifying the membership of the Euribor Steering Committee to promote independence.

Interested parties have until February 15 to submit responses.

See also:  IOSCO Report on Financial Benchmarks; e.g., LIBOR (The news story will also take you to two other studies in addition to the IOSCO Report.)