Living in a volatile regulatory climate, we cannot not forget the best way to surf the wave of change is to stay on the board. A new calendar gives us the chance to reset our footing. It also brings us updated thresholds for various regulatory requirements. As you finalize your new year business plans, please make sure that your policies and procedures have been updated to take the new thresholds into account.
Reg. Z exemption threshold
For those loans not secured by real property or personal property used as a principal dwelling, or private education loans, Section 1026.3(1) establishes a threshold limit for covered loans. While this threshold is evaluated annually, it remains at $58,300 for 2021.
One of the exception categories that comes up often is that of the Small Creditor. The asset size threshold for 2021 increased to $2.23 billion, up from $2.202 billion in 2020.
High Price Mortgage Loans
The Truth in Lending Act establishes special appraisal requirements for “higher-priced mortgage loans” or “HPMLs.” The exemption threshold increased from $26,700 to $27,200, effective January 1, 2020. Of course, the Small Creditor exception discussed above also impacts whether the bank must escrow for an HPML as well.
To determine whether a transaction is a high-cost mortgage, a creditor must exam the points and fees it is charging. Based on the loan balance, the regulation sets a limit to the points and fees. Reflecting an increase in the Consumer Price Index, the new formula is:
- 5 percent of the total loan amount for a transaction with a loan amount of $22,052or more; or
- The lesser of 8 percent of the total loan amount or $1,103 for a transaction with a loan amount of less than $22,052.
QM Points and Fees Limits
Points and fees also come up in the context of the Qualified Mortgage. For qualified mortgages, which provide creditors with certain protections from liability under the Ability-to-Repay Rule, the maximum thresholds for total points and fees in 2021 will be:
- 3% of the total loan amount for loans greater than or equal to $110,260;
- $3,308 for loans greater than or equal to $66,156 but less than $110,260;
- 5% of the total loan amount for loans greater than or equal to $22,052 but less than $66,156;
- $1,103 for loans greater than or equal to $13,783 but less than $22,052; and
- 8% of the total loan amount for loans less than $13,783
Compliance Alliance helps you adapt to the ever-changing regulatory landscape with the best and most practical tools on the market. We’ve updated our tools to reflect the thresholds discussed above. 2020 threw a lot our way very rapidly, as will 2021. While PPP is top-of-mind right now, and you can find many helpful tools on our site, be sure to also check out our Safety and Soundness Incoming Information Assessment, which will help you are surf the wave of change in 2021 and not being buried under it.