Issue Brief: The Consumer Financial Protection Bureau’s Amendments to the Ability-to-Repay Rule

The Consumer Financial Protection Bureau (CFPB) recently issued a series of amendments to the Ability-to-Repay rule, which is set to go into effect January 10, 2014. The rule, originally issued in January of this year, holds lenders legally responsible for acting in good faith and making a reasonable determination, before closing, that a homebuyer has a realistic chance of repaying a mortgage loan. The rule will set the tone for the U.S. mortgage market because it places a legal duty on lenders to ensure that a consumer can afford to pay their mortgage. The law will presume lenders have complied with this duty only if they issue qualified mortgage (QM) loans. Because of this presumption, and the increased legal protection it provides, it is expected that almost all lenders will minimize the origination of non- QM loans. The CFPB’s amendments to the rule relate directly to the underwriting requirements for qualified mortgages and address:

  • How loan originator compensation is to be calculated in determining points and fees;
  • The elimination of the 43 percent debt-to-Income ratio for some qualified mortgage loans issued by small lenders;
  • Increasing the amount that small lenders may exceed the average prime offer rate from 1.5 percent to 3.5 percent;
  • Delaying the phase-out of balloon-payment loans;
  • The exemption of government agencies, programs, and credit products from the ability-to-pay rule entirely.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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