The new APR proposed rule eliminates exceptions currently allowed in Reg Z, said Lauren Calhoun, compliance manager for CUNA Mutual. Everything is included in the proposed APR definition except charges that are applied after the loan closes, such as late fees or delinquency charges. That means previously exempted costs like application fees will now be included, Calhoun said.
In the rules released Monday, the CFPB also proposed an electronic record-keeping mandate for the new combined disclosure forms, a systems issue that Calhoun said would be particularly difficult for small credit unions.
“Basically, the new disclosures must be kept electronically in a standard format for a period of time … depending upon the type of content, from three to five years,” she said. “The reason for that is the bureau says it would make them more easily traceable from a compliance perspective.”
The CFPB also proposed revised and expanded triggers for HOEPA coverage that would impose new restrictions, including a pre-loan counseling requirement.
“Previously, HOEPA used to only apply to refinancing and home equity loans, but now it is expanded to include purchases and home equity lines of credit,” Calhoun said. “The bottom line is more loans that will be subject to HOEPA requirements.”
Proposed adjustments to APR calculations would impact the HOEPA rule, because the additional costs that would be included in APR would increase the rate, which would classify even more mortgages as “high-cost” and subject to HOEPA.
The CFPB has proposed two ways to deal with the cause and effect of the new APR rule: one would increase the APR that triggers HOEPA, and the other would define a new trigger, not based upon APR. Calhoun said the bureau prefers the latter, but is seeking comment from industry on which to include in the final rule.