Federal Reserve Proposes Ability-to-Repay Rules for Mortgages
The Federal Reserve proposed a rule on April 19 that would require lenders to determine a consumer's ability to repay a mortgage before originating the loan. The proposal, which would also establish minimum mortgage underwriting standards, is being made under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The rule would apply to all consumer mortgages except home equity lines of credit, timeshare plans, reverse mortgages, or temporary loans.
Under the proposal, lenders would have four options for complying with the ability-to-repay requirement:
The proposed rule also would implement the Dodd-Frank Act's limit on prepayment penalties.
The comment period for the proposal ends July 22, 2011, after which the newly created Consumer Financial Protection Bureau will assume responsibility for finalizing the rule.
April 29, 2011