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ARTICLE · 02 MAY 2017

CFPB Prohibits Considering Down Payments for Non-QMs

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Once again, the Consumer Financial Protection Bureau ("CFPB") is providing compliance tips through its Supervisory Highlights for lenders making non-Qualified Mortgages ("non-QMs").

United StatesFinance and Banking
Kristie D. Kully
Kristie D. Kully
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Once again, the Consumer Financial Protection Bureau ("CFPB") is providing compliance tips through its Supervisory Highlights for lenders making non-Qualified Mortgages ("non-QMs"). In its latest set of Highlights, the CFPB addresses how a lender must consider a borrower's assets in underwriting those loans, and clarifies that a borrower's down payment cannot be treated as an asset for that purpose, apparently even if that policy has been shown to be predictive of strong loan performance.

The Dodd-Frank Act and the CFPB's Ability to Repay Rule generally require a lender making a closed-end residential mortgage loan to determine that the borrower will be able to repay the loan according to its terms. A lender may choose to follow the Rule's safe harbor by making loans within the QM parameters. Alternatively, a lender may opt for more underwriting flexibility (and somewhat less compliance certainty). When making a non-QM, a lender must consider eight mandated

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