Here’s What’s Happening to Truth in Lending’s Ability-to-Repay Provisions

by. Jane Pannier

Once again the CFPB has issued another final rule that includes further amendments to clarify portions of its new mortgage lending rules. This final rule addresses the Regulation Z ability-to-repay provisions issued in January 2013, that will go into effect on January 10, 2014.


The CFPB has adopted several amendments in this final rule to allow for certain exemptions, modifications and clarifications to its ability-to-repay requirements. The ability-to-repay requirements generally prohibit a creditor from making a mortgage loan unless it has first determined that the borrower has the ability-to-repay the loan. This final rule provides an exemption to the ability-to-repay requirement for creditors that have certain designations, for loans made under certain programs, by certain non-profit creditors, and for mortgage loans that are made under certain Federal emergency economic stabilization programs.

In addition, this final rule expands the definition of a qualified mortgage to include certain loans that are held in portfolio by small creditors and adds a temporary definition for balloon loans. Also, the final rule modifies the requirements in reference to how loan originator compensation is included in the calculation of points and fees for high-cost mortgages.

Operational Requirements


There are certain types of mortgage loans that are exempt from the new ability-to-repay requirements. This new rule adds some further exemptions for:

  • Mortgages extended through programs administered by a Housing Finance Agency (HFA);
  • Mortgages extended by a creditor designated as a Community Development Financial Institution (CDFI), a Downpayment Assistance Provider (DAP), or a Community Housing Development Organization (CDFO);
  • Mortgages extended by nonprofit creditors with an IRS 501(c)(3) designation and that meet certain other requirements; and
  • Mortgages extended through programs authorized under the Emergency Economic Stabilization Act of 2007.
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