The CFPB has published for public comment an interim final rule regarding the Alternative Mortgage Transaction Parity Act (AMTPA). Public comments on the rule are due Sept. 22, 2011.
AMTPA allows state-chartered or state-licensed “housing creditors” to make alternative mortgage transactions that would have otherwise been prohibited by state law, but requires that the creditors comply with certain federal regulations.
State housing creditors include savings associations, savings banks, mortgage bankers and other mortgage lenders.
The Dodd-Frank Act amends AMTPA in three ways, effective July 21, 2011:
- The definition of “alternative mortgage transaction” now omits language that referenced 1) certain balloon transactions; 2) shared equity or appreciation transactions; and 3) mortgage loans involving other features not common to traditional fixed-rate, fixed-term transactions. AMTs are still defined as loans “in which the interest rate or finance charge may be adjusted or renegotiated.”
- Language was added that affect preemption. AMTPA will no longer preempt “certain general state restrictions on mortgage transactions, including restrictions on prepayment penalties or late charges,” according to CFPB.
- The authority for issuing regulations to implement AMTPA transfers to the CFPB from the Office of the Comptroller of the Currency, Office of Thrift Supervision and the National Credit Union Administration. The Bureau may analyze existing regulations in the rule-making process.
Without AMTPA preemption, housing creditors may make these types of loans (such as certain variable-rate mortgages, adjustable-rate mortgages or fixed-rate mortgages with interest-only payments) under state laws, when applicable, or by following “straightforward federal requirements that provide customers basic protections,” the CFPB notes.
“This interim rule will help preserve certainty in affected mortgage markets. It will also give lenders, consumers, and state regulators time to adjust to recent changes to the law. AMTPA was designed to preserve consumer access to alternative mortgages. These mortgages aren’t for everyone, but some consumers find that alternatives to the traditional fixed-rate mortgage better suit their needs. Our action today helps preserve parity and access as Congress intended,” wrote Kelly Thompson Cochran on the CFPB blog.
Some say the Bureau shouldn’t let lenders preempt state laws that are sometimes tougher than their federal counterparts.
“The Alternative Mortgage Transaction Parity Act (AMTPA) was passed in 1982 for a very strange reason: banks wanted the right to make adjustable-rate mortgages even when state rules said they couldn’t. … State lawmakers did NOT want state-regulated banks to have the same sloppy, slippery rules that were followed by federally-regulated banks,” wrote Steven Miller on HSH.com, a web site that covers mortgage and consumer loan information.
The amendments do not apply to alternative mortgage transactions made on or before July 21, 2011, and the Bureau plans to issue further guidance soon, according to CFPB’s Bulletin 11-1.