HUD's Qualified Mortgage Rule: Announcement of Intention To Adopt Changes Pertaining to Exempted Transaction List, 65140-65142 [2014-25492]

Download as PDF 65140 Federal Register / Vol. 79, No. 212 / Monday, November 3, 2014 / Rules and Regulations questions about the obstacle departure procedure and terms used in the Final Rule. Conclusion Issued under authority provided by 49 U.S.C. 106(f), 44701(a), and 44703 in Washington, DC, on October 29, 2014. Lirio Liu, Director, Office of Rulemaking. After consideration of the comments submitted in response to the direct final rule, the FAA has determined that no further rulemaking action is necessary and believes that the Clarification of the Final Rule published September 30, 2014, will clarify any questions about the ODP and terms used in the Final Rule; therefore, amendment 135–131 remains in effect. [FR Doc. 2014–26052 Filed 10–31–14; 8:45 am] How To Obtain Additional Information [Docket No. FR 5812–N–01] A. Rulemaking Documents HUD’s Qualified Mortgage Rule: Announcement of Intention To Adopt Changes Pertaining to Exempted Transaction List An electronic copy of a rulemaking document may be obtained by using the Internet— 1. Search the Federal eRulemaking Portal (http://www.regulations.gov); 2. Visit the FAA’s Regulations and Policies Web page at http:// www.faa.gov/regulations_policies/ or 3. Access the Government Printing Office’s Web page at http:// www.gpo.gov/fdsys/. Copies may also be obtained by sending a request (identified by notice, amendment, or docket number of this rulemaking) to the Federal Aviation Administration, Office of Rulemaking, ARM–1, 800 Independence Avenue SW., Washington, DC 20591, or by calling (202) 267–9680. B. Comments Submitted to the Docket Comments received may be viewed by going to http://www.regulations.gov and following the online instructions to search the docket number for this action. Anyone is able to search the electronic form of all comments received into any of the FAA’s dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). rmajette on DSK3VPTVN1PROD with RULES C. Small Business Regulatory Enforcement Fairness Act The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996 requires FAA to comply with small entity requests for information or advice about compliance with statutes and regulations within its jurisdiction. A small entity with questions regarding this document, may contact its local FAA official, or the person listed under the FOR FURTHER INFORMATION CONTACT heading at the beginning of the preamble. To find out more about SBREFA on the Internet, visit http:// www.faa.gov/regulations_policies/ rulemaking/sbre_act/. VerDate Sep<11>2014 13:20 Oct 31, 2014 Jkt 235001 BILLING CODE 4910–13–P DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Part 203 Office of the Assistant Secretary for Housing—Federal Housing Commissioner, HUD. AGENCY: Announcement of change to HUD’s exempted transaction definition. ACTION: The Consumer Financial Protection Bureau (CFPB) is issuing a final rule being published concurrently with this document, and it can be found elsewhere in this Federal Register, entitled ‘‘Amendments to the 2013 Mortgage Rules under the Truth in Lending Act (Regulation Z),’’ amending certain terms in CFPB’s definition of ‘‘qualified mortgage’’ which HUD crossreferenced in HUD’s qualified mortgage definition. In accordance with the procedures incorporated in HUD’s definition of ‘‘qualified mortgage,’’ this document advises of HUD’s intention to adopt, for HUD’s qualified mortgage rule, CFPB’s changes to the exemption for non-profit transactions from the qualified mortgage standards. HUD is not, however, adopting the new points and fees cure provision adopted by CFPB for the reasons stated in this document, but is providing guidance to mortgagees on curing points and fees errors prior to insurance endorsement. SUMMARY: DATES: Effective Date: November 3, 2014. FOR FURTHER INFORMATION CONTACT: Michael P. Nixon, Office of Housing, Department of Housing and Urban Development, 451 7th Street SW., Room 9278, Washington, DC 20410; telephone number 202–402–5216, ext. 3094 (this is not a toll-free number). Persons with hearing or speech impairments may access this number through TTY by calling the Federal Relay Service at 800– 877–8339 (this is a toll-free number). SUPPLEMENTARY INFORMATION: PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 I. Background On December 11, 2013, at 78 FR 75215, HUD published a final rule that established a definition of ‘‘qualified mortgage’’ for single family residential mortgages that HUD insures, guarantees, or administers. Under HUD’s qualified mortgage rule, qualified mortgage status attaches at origination and insurance endorsement to those single family residential mortgages insured under the National Housing Act (12 U.S.C. 1701 et seq.), section 184 loans for Indian housing under the Housing and Community Development Act of 1992 (12 U.S.C. 1715z–13a) (Section 184 guaranteed loans), and section 184A loans for Native Hawaiian housing under the Housing and Community Development Act of 1992 (1715z–13b) (Section 184A guaranteed loans). HUD’s definition of ‘‘qualified mortgage’’ is codified for each program at 24 CFR 201.7, 203.19, 1005.120 and 1007.80. HUD defined ‘‘qualified mortgage’’ in a manner that aligned HUD’s definition, to the extent feasible and consistent with HUD’s mission, with that of the qualified mortgage definition promulgated by the CFPB, and which is codified at 12 CFR 1026.43. HUD undertook the alignment for the purpose of lessening future differences in standards for HUD’s single family residential insured mortgages and those established by the CFPB, which apply to conventional mortgages seeking designation as qualified mortgage. HUD’s alignment to CFPB’s standards also included cross-references to CFPB’s list of transactions exempted from the qualified mortgage definition, including a non-profit transaction exemption, and CFPB’s limit on points and fees for qualified mortgage status as of January 10, 2014. HUD’s definition of qualified mortgage provides that when CFPB amends its definition of qualified mortgage, HUD may announce the adoption of CFPB change or changes through publication of a notice and after providing FHA-approved mortgagees with time, as may be determined necessary, to implement. Members of the public interested in more detail about HUD’s qualified mortgage regulations may refer to the preamble of HUD’s September 30, 2013, proposed rule and HUD’s December 11, 2013, final rule, at 78 FR 59890, 78 FR 75215. II. HUD Notice of CFPB’s Final Rule Published elsewhere in this Federal Register is CFPB’s final rule amending the non-profit transaction exemption from the ability-to-repay rule and providing a limited cure mechanism for E:\FR\FM\03NOR1.SGM 03NOR1 Federal Register / Vol. 79, No. 212 / Monday, November 3, 2014 / Rules and Regulations the points and fees limit that applies to qualified mortgages. rmajette on DSK3VPTVN1PROD with RULES A. Amendment to the Non-Profit Transaction Exemption CFPB’s final rule amended the ‘‘exempted transaction’’ list to provide that certain interest-free, contingent subordinate liens originated by nonprofit creditors would not be counted towards the credit extension limit of 200 transactions that qualifies a nonprofit for the nonprofit exemption at 12 CFR 1026.43(a)(3)(v)(D). Specifically, the rule excludes consumer credit transactions if the transaction is secured by a subordinate lien; for the purpose of down payment, closing costs, or other similar home buyer assistance, such as principal or interest subsidies; for property rehabilitation assistance; for energy efficiency assistance; or for the purpose of foreclosure avoidance or prevention. Additionally, the consumer credit contract must not require payment of interest; must provide that repayment of the amount of the credit extended is forgiven either incrementally or in whole, at a date certain, and subject only to specified ownership and occupancy conditions; and the total of costs payable by the consumer in connection with the transaction at consummation is less than 1 percent of the amount of credit extended and includes no charges other than: Fees for recordation of security instruments, deeds, and similar documents, a bona fide and reasonable application fee and a bona fide and reasonable fee for housing counseling services. Lastly, the creditor must also comply with all other applicable requirements of this part in connection with the transaction. By excluding these interest-free, contingent subordinate liens from determining if a non-profit creditor qualifies for the non-profit exemption (i.e. extends credit secured by a dwelling no more than 200 times), more non-profit creditors will qualify for the exemption and additional consumers with income that does not exceed the low- and moderate-income household limit, as established pursuant to section 102 of the Housing and Community Development Act of 1974 (42 U.S.C. 5302(a)(20)), will have access to credit. For additional information about CFPB’s change, interested members of the public should refer to the CFPB’s proposed and final rules. See 79 FR 25730 and the CFPB’s final rule published elsewhere in this Federal Register entitled ‘‘Amendments to the 2013 Mortgage Rules under the Truth in Lending Act (Regulation Z).’’ VerDate Sep<11>2014 13:20 Oct 31, 2014 Jkt 235001 HUD sees value in maintaining consistency with CFPB’s rule when it is consistent with HUD’s mission and statutes. HUD believes that the amendment to the non-profit exemption in the exempted transaction list is balanced in a way to protect against abuse while providing more access to credit for borrowers with low- and moderate-incomes, consistent with HUD’s mission. Therefore, HUD is adopting the amendment and maintaining consistency with the CFPB’s list of exempted transactions at 12 CFR 1026.43(a)(3), as crossreferenced in HUD’s definition at 24 CFR 203.19.1 HUD’s definition will thus track the new CFPB definition as of November 3, 2014. This change will be effective for all case numbers assigned on or after the effective date of this document. B. Amendment to the Points and Fees Limit Provision—Post Consummation Cure Provision CFPB’s final rule also provides a limited, post-consummation cure mechanism for loans that are originated with the expectation of qualified mortgage status but actually exceed the points and fees limit for qualified mortgage status. The CFPB’s final rule amends the points and fees provision at 12 CFR 1026.43(e)(3) to permit a creditor or assignee to cure an inadvertent excess over the qualified mortgage points and fees limits by refunding to the consumer the amount of excess, under certain conditions.2 Given the complexity and exercise of judgment involved in determining points and fees, CFPB found that some creditors may not originate and secondary market participants may not purchase mortgage loans that are near the qualified mortgage points and fees limit. Given the establishment of this buffer, CFPB was concerned that access to credit for consumers seeking loans at the margins of the limits might be negatively affected. Therefore, the provision would permit a creditor or assignee to cure an inadvertent excess over the qualified mortgage points and 1 The list of mortgage transactions exempted under12 CFR 1026.43(a)(2) in the Title II program at 24 CFR 203.19 is also included in the Title I program at 24 CFR 201.7, the Section 184 guaranteed loan program at 24 CFR 1005.120 and the Section 184A guaranteed loan program at 24 CFR 1007.80 by cross-reference to 24 CFR 203.19(c)(2). 2 Cure means a procedure to reduce points and fees or debt-to-income ratios after consummation when the qualified mortgage limits have been inadvertently exceeded. See 79 FR 25740 and the CFPB’s final rule published elsewhere in this Federal Register entitled ‘‘Amendments to the 2013 Mortgage Rules under the Truth in Lending Act (Regulation Z).’’ PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 65141 fees limit and the creditor or assignee must refund to the consumer within 210 days after consummation the amount of money over the points and fees limit. This new provision is intended to ease the current burden on the market, but will expire on January 10, 2021. For additional information about CFPB’s change interested members of the public should refer to the CFPB’s proposed and final rules. See 79 FR 25730 and the CFPB’s final rule published elsewhere in this Federal Register entitled ‘‘Amendments to the 2013 Mortgage Rules under the Truth in Lending Act (Regulation Z).’’ Despite HUD’s authority under 24 CFR 203.19 to adopt the CFPB’s changes to points and fees by notice for this subset of loans, and while recognizing the usefulness of a cure provision for these loans, HUD cannot adopt the CFPB’s cure provision for the following reasons, including but not limited to: First, the CFPB’s cure provision requires that the cured loan meet CFPB’s qualified mortgage definition in order to qualify for the cure, but HUD has codified its own definition, which differs. Second, if HUD permitted a FHA lender to return funds to a borrower or pay down the principal balance for a single family mortgage insured under Title II, the amount returned could result in a violation of the statutorily required borrower minimum cash investment of 3.5 percent or other FHA requirements relating to interested party contributions and the calculation of the maximum insured mortgage value.3 In addition, unlike the general market, the points and fees limit for Title II mortgages is a requirement for insurability of the mortgage by FHA. As an insurer of the mortgage, it is imperative that FHA ensure all eligibility requirements are met prior to insurance endorsement. Therefore, while permitting a cure in connection with FHA-insured mortgages may have the same benefit for the FHA-approved lender as a lender in the general market, the impact on FHA as the insurer is substantially different. While FHA is not able to adopt the CFPB’s cure provision that allows the cure period to extend beyond insurance endorsement, FHA approved lenders are not without the ability to cure errors that occur in origination before submission for insurance endorsement. FHA reminds all FHA-approved mortgagees that, consistent with FHA’s existing Notice of Return/Notice of Non3 See section 203(b)(9) of the National Housing Act (12 USC 1709(b)(9)) which requires the homebuyer to pay in cash or equivalent on account of the property an amount equal to not less than 3.5 percent of the appraised value of the property. E:\FR\FM\03NOR1.SGM 03NOR1 65142 Federal Register / Vol. 79, No. 212 / Monday, November 3, 2014 / Rules and Regulations Endorsement (NOR) process, mortgagees may continue to cure errors and resubmit mortgages for insurance endorsement, provided all eligibility criteria are met at the time of insurance endorsement. FHA believes that the existing ability to cure errors is sufficient and is consistent with the attachment of qualified mortgage status at endorsement. As such, HUD is not adopting the CFPB’s cure provisions and does not believe any further ability to cure is warranted. In summary, HUD’s qualified mortgage definition for Title II mortgages, except for manufactured housing and exempted transactions, will continue to use the CFPB’s points and fees limit at 12 CFR 1026.43(e)(3) as of January 10, 2014 and not include the change published on November 3, 2014. Need for Correction Dated: October 21, 2014. Carol J. Galante, Assistant Secretary for Housing-Federal Housing Commissioner. BILLING CODE 4830–01–P As published, the final regulations (TD 9696) contain an error that may prove to be misleading and is in need of clarification. Correction of Publication Accordingly, the final regulations (TD 9696), that are the subject of FR Doc. 2014–23306, are corrected as follows: On page 59115, first column, the fourth line of the signature block, the language ‘‘Approved: August 22, 2013.’’ Is corrected to read ‘‘Approved: July 11, 2014.’’ Martin V. Franks, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel, (Procedure and Administration). [FR Doc. 2014–26068 Filed 10–31–14; 8:45 am] [FR Doc. 2014–25492 Filed 10–31–14; 8:45 am] DEPARTMENT OF HOMELAND SECURITY BILLING CODE 4210–67–P Coast Guard 33 CFR Part 117 DEPARTMENT OF THE TREASURY [Docket No. USCG–2014–0889] Internal Revenue Service Drawbridge Operation Regulation; Cerritos Channel, Long Beach, CA 26 CFR Part 1 Coast Guard, DHS. Notice of deviation from drawbridge regulation. AGENCY: ACTION: [TD 9696] RIN 1545–BH60 Internal Revenue Service (IRS), Treasury. ACTION: Final regulations; correction. AGENCY: This document contains corrections to final regulations (TD 9696) that were published in the Federal Register on October 1, 2014 (79 FR 59112). The final regulations are relating to the deductibility of expenses for lodging when an individual is not travelling away from home (local lodging). SUMMARY: This correction is effective on November 3, 2014 and applicable beginning October 1, 2014. FOR FURTHER INFORMATION CONTACT: Peter Ford, at (202) 317–7011 (not a toll free number). SUPPLEMENTARY INFORMATION: rmajette on DSK3VPTVN1PROD with RULES DATES: Background The final regulations (TD 9696) that are the subject of this correction is under sections 162 and 262 of the Internal Revenue Code. VerDate Sep<11>2014 13:20 Oct 31, 2014 The Coast Guard has issued a temporary deviation from the operating schedule that governs the Henry Ford Avenue railroad drawbridge across Cerritos Channel, mile 4.8, at Long Beach, CA. The deviation is necessary to allow the bridge owner to make necessary bridge maintenance repairs. This deviation allows the bridge to remain in the closed-to-navigation position during the deviation period. DATES: This deviation is effective from 5 a.m. on November 12, 2014, to 5 p.m. on November 17, 2014. ADDRESSES: The docket for this deviation, [USCG–2014–0889], is available at http://www.regulations.gov. Type the docket number in the ‘‘SEARCH’’ box and click ‘‘SEARCH.’’ Click on Open Docket Folder on the line associated with this deviation. You may also visit the Docket Management Facility in Room W12–140 on the ground floor of the Department of Transportation West Building, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. SUMMARY: Local Lodging Expenses; Correction Jkt 235001 PO 00000 Frm 00004 Fmt 4700 If you have questions on this temporary deviation, call or email David H. Sulouff, Chief, Bridge Section, Eleventh Coast Guard District; telephone 510– 437–3516, email David.H.Sulouff@uscg.mil. If you have questions on viewing the docket, call Cheryl Collins, Program Manager, Docket Operations, telephone 202–366– 9826. SUPPLEMENTARY INFORMATION: The Port of Los Angeles has requested a temporary change to the operation of the Henry Ford Avenue railroad drawbridge, mile 4.8, over Cerritos Channel, at Long Beach, CA. The drawbridge navigation span provides 7 feet vertical clearance above Mean High Water in the closed-to-navigation position. In accordance with 33 CFR 117.147(b), the drawspan is maintained in the fully open position, except when a train is crossing or for maintenance. When the draw is in the closed position, it opens on signal. Navigation on the waterway is mainly recreational, emergency response and commercial tug and barge combinations between the ports of Los Angeles and Long Beach. The Port of Los Angeles has requested the drawbridge be allowed to remain closed to navigation at various times from 5 a.m. on November 12, 2014 to 5 p.m. on November 17, 2014, so they can perform replacement of the auxiliary counterweight wire ropes on the drawbridge. The vertical lift span will be secured in the closed to navigation position at various times as follows: 6 a.m. to 10 a.m. November 12, 2014; 2:30 p.m. on November 12, 2014 to 6:30 a.m. on November 13, 2014; 6 a.m. to 3 p.m. November 14, 2014; and 6 a.m. to 3 p.m. on November 17, 2014. Mariners must contact the bridge tender to obtain status of the drawbridge when planning transits between the ports. This temporary deviation has been coordinated with the waterway users. No objections to the proposed temporary deviation were raised. Vessels able to pass through the bridge in the closed position may do so at anytime. The bridge will not be able to open for emergencies. There is an alternative route, transiting around the south side of Terminal Island, for vessels unable to pass through the bridge in the closed position. The Coast Guard will inform waterway users of this temporary deviation via our Local and Broadcast Notices to Mariners, to minimize resulting navigational impacts. In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the FOR FURTHER INFORMATION CONTACT: Sfmt 4700 E:\FR\FM\03NOR1.SGM 03NOR1

Agencies

[Federal Register Volume 79, Number 212 (Monday, November 3, 2014)]
[Rules and Regulations]
[Pages 65140-65142]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-25492]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 203

[Docket No. FR 5812-N-01]


HUD's Qualified Mortgage Rule: Announcement of Intention To Adopt 
Changes Pertaining to Exempted Transaction List

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Announcement of change to HUD's exempted transaction 
definition.

-----------------------------------------------------------------------

SUMMARY: The Consumer Financial Protection Bureau (CFPB) is issuing a 
final rule being published concurrently with this document, and it can 
be found elsewhere in this Federal Register, entitled ``Amendments to 
the 2013 Mortgage Rules under the Truth in Lending Act (Regulation 
Z),'' amending certain terms in CFPB's definition of ``qualified 
mortgage'' which HUD cross-referenced in HUD's qualified mortgage 
definition. In accordance with the procedures incorporated in HUD's 
definition of ``qualified mortgage,'' this document advises of HUD's 
intention to adopt, for HUD's qualified mortgage rule, CFPB's changes 
to the exemption for non-profit transactions from the qualified 
mortgage standards. HUD is not, however, adopting the new points and 
fees cure provision adopted by CFPB for the reasons stated in this 
document, but is providing guidance to mortgagees on curing points and 
fees errors prior to insurance endorsement.

DATES: Effective Date: November 3, 2014.

FOR FURTHER INFORMATION CONTACT: Michael P. Nixon, Office of Housing, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
9278, Washington, DC 20410; telephone number 202-402-5216, ext. 3094 
(this is not a toll-free number). Persons with hearing or speech 
impairments may access this number through TTY by calling the Federal 
Relay Service at 800-877-8339 (this is a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    On December 11, 2013, at 78 FR 75215, HUD published a final rule 
that established a definition of ``qualified mortgage'' for single 
family residential mortgages that HUD insures, guarantees, or 
administers. Under HUD's qualified mortgage rule, qualified mortgage 
status attaches at origination and insurance endorsement to those 
single family residential mortgages insured under the National Housing 
Act (12 U.S.C. 1701 et seq.), section 184 loans for Indian housing 
under the Housing and Community Development Act of 1992 (12 U.S.C. 
1715z-13a) (Section 184 guaranteed loans), and section 184A loans for 
Native Hawaiian housing under the Housing and Community Development Act 
of 1992 (1715z-13b) (Section 184A guaranteed loans). HUD's definition 
of ``qualified mortgage'' is codified for each program at 24 CFR 201.7, 
203.19, 1005.120 and 1007.80.
    HUD defined ``qualified mortgage'' in a manner that aligned HUD's 
definition, to the extent feasible and consistent with HUD's mission, 
with that of the qualified mortgage definition promulgated by the CFPB, 
and which is codified at 12 CFR 1026.43. HUD undertook the alignment 
for the purpose of lessening future differences in standards for HUD's 
single family residential insured mortgages and those established by 
the CFPB, which apply to conventional mortgages seeking designation as 
qualified mortgage.
    HUD's alignment to CFPB's standards also included cross-references 
to CFPB's list of transactions exempted from the qualified mortgage 
definition, including a non-profit transaction exemption, and CFPB's 
limit on points and fees for qualified mortgage status as of January 
10, 2014. HUD's definition of qualified mortgage provides that when 
CFPB amends its definition of qualified mortgage, HUD may announce the 
adoption of CFPB change or changes through publication of a notice and 
after providing FHA-approved mortgagees with time, as may be determined 
necessary, to implement. Members of the public interested in more 
detail about HUD's qualified mortgage regulations may refer to the 
preamble of HUD's September 30, 2013, proposed rule and HUD's December 
11, 2013, final rule, at 78 FR 59890, 78 FR 75215.

II. HUD Notice of CFPB's Final Rule

    Published elsewhere in this Federal Register is CFPB's final rule 
amending the non-profit transaction exemption from the ability-to-repay 
rule and providing a limited cure mechanism for

[[Page 65141]]

the points and fees limit that applies to qualified mortgages.

A. Amendment to the Non-Profit Transaction Exemption

    CFPB's final rule amended the ``exempted transaction'' list to 
provide that certain interest-free, contingent subordinate liens 
originated by non-profit creditors would not be counted towards the 
credit extension limit of 200 transactions that qualifies a nonprofit 
for the nonprofit exemption at 12 CFR 1026.43(a)(3)(v)(D). 
Specifically, the rule excludes consumer credit transactions if the 
transaction is secured by a subordinate lien; for the purpose of down 
payment, closing costs, or other similar home buyer assistance, such as 
principal or interest subsidies; for property rehabilitation 
assistance; for energy efficiency assistance; or for the purpose of 
foreclosure avoidance or prevention. Additionally, the consumer credit 
contract must not require payment of interest; must provide that 
repayment of the amount of the credit extended is forgiven either 
incrementally or in whole, at a date certain, and subject only to 
specified ownership and occupancy conditions; and the total of costs 
payable by the consumer in connection with the transaction at 
consummation is less than 1 percent of the amount of credit extended 
and includes no charges other than: Fees for recordation of security 
instruments, deeds, and similar documents, a bona fide and reasonable 
application fee and a bona fide and reasonable fee for housing 
counseling services. Lastly, the creditor must also comply with all 
other applicable requirements of this part in connection with the 
transaction.
    By excluding these interest-free, contingent subordinate liens from 
determining if a non-profit creditor qualifies for the non-profit 
exemption (i.e. extends credit secured by a dwelling no more than 200 
times), more non-profit creditors will qualify for the exemption and 
additional consumers with income that does not exceed the low- and 
moderate-income household limit, as established pursuant to section 102 
of the Housing and Community Development Act of 1974 (42 U.S.C. 
5302(a)(20)), will have access to credit. For additional information 
about CFPB's change, interested members of the public should refer to 
the CFPB's proposed and final rules. See 79 FR 25730 and the CFPB's 
final rule published elsewhere in this Federal Register entitled 
``Amendments to the 2013 Mortgage Rules under the Truth in Lending Act 
(Regulation Z).''
    HUD sees value in maintaining consistency with CFPB's rule when it 
is consistent with HUD's mission and statutes. HUD believes that the 
amendment to the non-profit exemption in the exempted transaction list 
is balanced in a way to protect against abuse while providing more 
access to credit for borrowers with low- and moderate-incomes, 
consistent with HUD's mission. Therefore, HUD is adopting the amendment 
and maintaining consistency with the CFPB's list of exempted 
transactions at 12 CFR 1026.43(a)(3), as cross-referenced in HUD's 
definition at 24 CFR 203.19.\1\ HUD's definition will thus track the 
new CFPB definition as of November 3, 2014. This change will be 
effective for all case numbers assigned on or after the effective date 
of this document.
---------------------------------------------------------------------------

    \1\ The list of mortgage transactions exempted under12 CFR 
1026.43(a)(2) in the Title II program at 24 CFR 203.19 is also 
included in the Title I program at 24 CFR 201.7, the Section 184 
guaranteed loan program at 24 CFR 1005.120 and the Section 184A 
guaranteed loan program at 24 CFR 1007.80 by cross-reference to 24 
CFR 203.19(c)(2).
---------------------------------------------------------------------------

B. Amendment to the Points and Fees Limit Provision--Post Consummation 
Cure Provision

    CFPB's final rule also provides a limited, post-consummation cure 
mechanism for loans that are originated with the expectation of 
qualified mortgage status but actually exceed the points and fees limit 
for qualified mortgage status. The CFPB's final rule amends the points 
and fees provision at 12 CFR 1026.43(e)(3) to permit a creditor or 
assignee to cure an inadvertent excess over the qualified mortgage 
points and fees limits by refunding to the consumer the amount of 
excess, under certain conditions.\2\
---------------------------------------------------------------------------

    \2\ Cure means a procedure to reduce points and fees or debt-to-
income ratios after consummation when the qualified mortgage limits 
have been inadvertently exceeded. See 79 FR 25740 and the CFPB's 
final rule published elsewhere in this Federal Register entitled 
``Amendments to the 2013 Mortgage Rules under the Truth in Lending 
Act (Regulation Z).''
---------------------------------------------------------------------------

    Given the complexity and exercise of judgment involved in 
determining points and fees, CFPB found that some creditors may not 
originate and secondary market participants may not purchase mortgage 
loans that are near the qualified mortgage points and fees limit. Given 
the establishment of this buffer, CFPB was concerned that access to 
credit for consumers seeking loans at the margins of the limits might 
be negatively affected. Therefore, the provision would permit a 
creditor or assignee to cure an inadvertent excess over the qualified 
mortgage points and fees limit and the creditor or assignee must refund 
to the consumer within 210 days after consummation the amount of money 
over the points and fees limit. This new provision is intended to ease 
the current burden on the market, but will expire on January 10, 2021. 
For additional information about CFPB's change interested members of 
the public should refer to the CFPB's proposed and final rules. See 79 
FR 25730 and the CFPB's final rule published elsewhere in this Federal 
Register entitled ``Amendments to the 2013 Mortgage Rules under the 
Truth in Lending Act (Regulation Z).''
    Despite HUD's authority under 24 CFR 203.19 to adopt the CFPB's 
changes to points and fees by notice for this subset of loans, and 
while recognizing the usefulness of a cure provision for these loans, 
HUD cannot adopt the CFPB's cure provision for the following reasons, 
including but not limited to: First, the CFPB's cure provision requires 
that the cured loan meet CFPB's qualified mortgage definition in order 
to qualify for the cure, but HUD has codified its own definition, which 
differs. Second, if HUD permitted a FHA lender to return funds to a 
borrower or pay down the principal balance for a single family mortgage 
insured under Title II, the amount returned could result in a violation 
of the statutorily required borrower minimum cash investment of 3.5 
percent or other FHA requirements relating to interested party 
contributions and the calculation of the maximum insured mortgage 
value.\3\ In addition, unlike the general market, the points and fees 
limit for Title II mortgages is a requirement for insurability of the 
mortgage by FHA. As an insurer of the mortgage, it is imperative that 
FHA ensure all eligibility requirements are met prior to insurance 
endorsement. Therefore, while permitting a cure in connection with FHA-
insured mortgages may have the same benefit for the FHA-approved lender 
as a lender in the general market, the impact on FHA as the insurer is 
substantially different.
---------------------------------------------------------------------------

    \3\ See section 203(b)(9) of the National Housing Act (12 USC 
1709(b)(9)) which requires the homebuyer to pay in cash or 
equivalent on account of the property an amount equal to not less 
than 3.5 percent of the appraised value of the property.
---------------------------------------------------------------------------

    While FHA is not able to adopt the CFPB's cure provision that 
allows the cure period to extend beyond insurance endorsement, FHA 
approved lenders are not without the ability to cure errors that occur 
in origination before submission for insurance endorsement. FHA reminds 
all FHA-approved mortgagees that, consistent with FHA's existing Notice 
of Return/Notice of Non-

[[Page 65142]]

Endorsement (NOR) process, mortgagees may continue to cure errors and 
resubmit mortgages for insurance endorsement, provided all eligibility 
criteria are met at the time of insurance endorsement. FHA believes 
that the existing ability to cure errors is sufficient and is 
consistent with the attachment of qualified mortgage status at 
endorsement. As such, HUD is not adopting the CFPB's cure provisions 
and does not believe any further ability to cure is warranted.
    In summary, HUD's qualified mortgage definition for Title II 
mortgages, except for manufactured housing and exempted transactions, 
will continue to use the CFPB's points and fees limit at 12 CFR 
1026.43(e)(3) as of January 10, 2014 and not include the change 
published on November 3, 2014.

    Dated: October 21, 2014.
Carol J. Galante,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 2014-25492 Filed 10-31-14; 8:45 am]
BILLING CODE 4210-67-P