Dodd-Frank Wall Street Reform and Consumer

Protection Act

Title XIV – Mortgage Reform and Anti-Predatory Lending Act

• New duties are placed on mortgage originators to act in the best interest of consumers, to ensure that consumers will be able to repay mortgage loans

• Implementation:• Title XIV and regulations to be issued by the Federal

Reserve Board will be “designated laws” under the jurisdiction of the new consumer financial protection bureau

• Title XIV creates:• Two new federal causes of action against originators

and lenders;• At least one new (and interesting) investment

opportunity

Title XIV – Mortgage Reform and Anti-Predatory Lending Act

Specific Provisions:• New residential mortgage loan origination

standards, through amendments to the Truth in Lending Act

• Increased civil penalties under the Truth in Lending Act:• Civil money penalties are doubled• Statute of limitations extended to 3 years

• Yield spread premiums are eliminated in most cases

Title XIV – Mortgage Reform and Anti-Predatory Lending Act

Specific Provisions: (cont.)• Federal Reserve regulations will prohibit originators

from placing consumers in a mortgage loan when:• The consumer lacks a reasonable ability to repay, or the

loan has certain predatory characteristics;• The mortgage loan is not a “qualified mortgage” or involves

certain abusive practices, or involves certain abusive practices that promote credit disparities

• The new “qualified mortgage” – plain vanilla mortgage without any bells and whistles• Provides a safe harbor – a presumption of compliance

with mortgage requirements

Title XIV – Mortgage Reform and Anti-Predatory Lending Act

Specific Provisions: (cont.)• New cause of action for failing to comply with new

requirements:• Liability not exceeding the greater of Actual Damages or 3

times the total compensation received by the originator, plus costs and attorneys fees

• New cause of action to a Consumer in Default• Consumer may assert violations of the ability to repay

standard, or the prohibition against steering, as a defense to a foreclosure action

• Consumer may seek recoupment or set-off of the damages for such violations

Title XIV – Mortgage Reform and Anti-Predatory Lending Act

• New Investment Opportunity:• The HUD Secretary must publish materials informing

potential home buyers of the availability and importance of obtaining a home inspection

• Property Appraisal Requirements; Independence• New Appraisal subcommittee of the Federal Financial

Institution Examination Council• Supervision of 3rd party providers of appraisal

management service• Supervision of state oversight by appraisal

subcommittee• Comptroller general study on appraisal process• National appraisal complaint hotline