Compliance Blog

Written by Bernadette Clair, Regulatory Compliance Counsel

Small Entity Compliance Guide on ATR/QM. Last week, the CFPB issued an updated Small Entity Compliance Guide for the Ability-to-Repay and Qualified Mortgage (ATR/QM) Rule. This update incorporates changes  that were included in the June 2013 ATR/QM Concurrent Final Rule and July 2013 Final Rule, both of which amended the final rule issued January 10, 2013.

Today I want to focus on the section of the guide dealing with balloon-payment qualified mortgages (balloon-payment QMs). In the June 2013 ATR/QM Concurrent Final Rule, the CFPB adopted a two-year transition period during which all small creditors can make balloon-payment QMs, even if they do not operate predominantly in rural or underserved areas.

Keep in mind that to qualify for the exemption as a small creditor, a credit union must have less than $2 billion in assets and have originated 500 or fewer closed-end, first lien mortgages in the preceding year.  The guide provides this overview of the transition period:

“The Bureau is providing a two-year transition period during which all small creditors can make Balloon-Payment QMs, regardless of where the small creditor operates. After that two-year period expires, only small creditors that operate predominantly in rural or underserved areas will be able to make Balloon-Payment QMs. On or before  January 10, 2016 (two years after the effective date of the ATR/QM rule), you can originate Balloon-Payment QMs if you satisfy the asset size and number of originations requirements. Balloon-Payment QMs that are originated during this two-year period will retain their QM status after January 10, 2016, assuming the requirements to hold the loan in portfolio are met.

After January 10, 2016, you can originate Balloon-Payment QMs only if you meet the asset size and number of originations criteria as well as a requirement that you operate predominantly in rural or underserved areas.”

The CFPB also provides this tip:

“Implementation Tip: After January 10, 2016, in order to make Balloon-Payment QMs, more than half of your organization’s first-lien covered transactions in the prior calendar year must have been secured by properties in rural areas (equivalent to the USDA’s Economic Research Service Urban Influence Codes 4, 6, 7, 8, 9, 10, 11, or 12) or underserved areas (counties where no more than two creditors extend five or more first-lien covered transactions in a calendar year). The Bureau will publish an annual list of rural or underserved counties. This is not the same definition of “rural” used for Home Mortgage Disclosure Act (HMDA) reporting or used by other agencies. For example, you may not be considered rural under this definition even though you are considered rural under HMDA and are not a HMDA reporter.”

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NAFCU Resources. Credit unions can learn more about the updates to the ATR/QM rule during a NAFCU webcast on August 21st.  Find more information and register here. Remember, NAFCU's webcasts are available to anyone and everyone.  Also, NAFCU’s Compliance Calendar has been updated with the latest CFPB small entity guides for ATR/QM and remittances.

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Consumer Compliance Outlook Webinar. Tomorrow, the Federal Reserve System “Outlook Live” Audio Conference series will host a webinar on Conducting Consumer Compliance Risk Assessments – Examiner Insights. Topics to be covered include:

• What are risk assessments and why are they important?

• Suggestions on ways to complete a risk assessment for a business line or product

• Suggestions on ways to complete a risk assessment for a specific department

• Risk assessment red flags

The webinar will be Tuesday, August 20, 2013, 2:00 p.m. – 3:00 p.m. Eastern. You can find more information and register for the webinar here.