CFPB Publishes Annual High Cost Mortgage and QM Adjustments

The CFPB recently published a final rule regarding several annual adjustments it is required to make pursuant to Regulation Z. In relevant part, the adjustments reflect changes to the high cost mortgage thresholds under HOEPA, and the Qualified Mortgage (“QM”) points and fees limits under the ability to repay/QM provisions of Dodd-Frank. These changes will take effect January 1, 2019. A copy of the final rule may be found here.

2019 High Cost Mortgage Thresholds. Under the rule that implements the HOEPA points-and-fees coverage test,[1] the CFPB is required to annually adjust the total loan amount and fee thresholds that determine whether a transaction is a high cost mortgage. The final rule increases the current total loan amount threshold from $21,032 to $21,549, and the current points and fees threshold from $1,052 to $1,077. Accordingly, in 2019, a transaction will be a high-cost mortgage (1) if the total loan amount is $21,549 or more and the points and fees exceed 5 percent of the total loan amount, or (2) if the total loan amount is less than $21,549 and the points and fees exceed the lesser of $1,077 or 8 percent of the total loan amount.

2019 QM Loan Amount, Points, and Fee Limits. Pursuant to its ability to repay/QM rule,[2] the CFPB must annually adjust the points and fees limits that a loan cannot exceed to satisfy the requirements for a qualified mortgage. The CFPB must also annually adjust the related loan amount limits. Effective January 1, 2019, a covered transaction is a qualified mortgage if:

  • For a loan amount greater than or equal to $107,747 (currently $105,158), the points and fees may not exceed 3 percent of the total loan amount;
  • For a loan amount greater than or equal to $64,648 (currently $63,095) but less than $107,747, points and fees may not exceed $3,232;
  • For a loan amount greater than or equal to $21,549 (currently $21,032) but less than $64,648, points and fees may not exceed 5 percent of the total loan amount;
  • For a loan amount greater than or equal to $13,468 (currently $13,145) but less than $21,549, points and fees may not exceed $1,077; or
  • For a loan amount less than $13,468 (currently $13,145), points and fees may not exceed 8 percent of the total loan amount

[1] 12 CFR 1026.32(a)(1)(ii).

[2] 12 CFR 1026.43(e)(3)(ii).