Special Alert: CFPB Guidance States That Successors Are Not Subject to the ATR/QM Rule
Buckley Sandler Special AlertClinton R. Rockwell, Jeremiah S. Buckley, Joseph M. Kolar, John P. Kromer, Joseph J. Reilly, Benjamin K. Olson, Jeffrey P. Naimon
On July 8, 2014, the CFPB issued an interpretive rule stating that the addition of a successor as an obligor on a mortgage does not trigger the Ability-to-Repay/Qualified Mortgage Rule (“ATR/QM Rule”) requirements if the successor previously received an interest in the property securing the mortgage by operation of law, such as through inheritance or divorce. Creditors may rely on the interpretive rule as a safe harbor under section 130(f) of the Truth in Lending Act (“TILA”).
In adopting the interpretations described below, it appears that the CFPB primarily intended to respond to inquiries from the industry and consumer advocates about situations where one family member inherits a home from another and, in order to keep the home, requests to be added to the mortgage and to modify its terms, such as by reducing the rate or payments.
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Questions regarding the matters discussed in the Alert may be directed to any of our lawyers listed below, or to any other Buckley Sandler attorney with whom you have consulted in the past.