By Phil Riske | Managing Editor
(STATE CAPITOL)—Effective a year ago, the Truth in Lending Act, which prohibits creditors from issuing higher-priced mortgage loans without regard to consumer ability to repay, was amended to implement sections of the Dodd-Frank Act, requiring creditors to make a reasonable, good faith determination of a consumer’s ability to repay a mortgage loan prior to extending them credit.
Under the rule, creditors must consider certain minimum underwriting factors in making ability-to-repay determinations and it also provides certain protections from liability under the ability-to-repay requirement for qualified mortgages. (A qualified mortgage is generally defined as any loan with a debt-to-income ratio of 43 percent or less.}
On Monday, the Arizona passed and sent to the House a non-binding measure (SM1011) urging the president, Congress and the Consumer Financial Protection Bureau (CFPB) to modify existing federal standards for qualified mortgage loans
to establish alternative criteria for determining a consumer’s ability to repay a mortgage loan, including permitting lenders to exceed the current 43 percent debt-to-income ratio.
The Senate memorial, sponsored by Sen. Steve Farley, a liberal Democrat from Tucson, also calls for the creation of a fee schedule enabling lenders to price loans based on the levels of risk posed by consumers.
For the first time in his legislative history, conservative Republican Senate President Andy Biggs voted for a Farley bill.
