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Informational Memorandum
Subject:Ability-to-Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z)
Date of Memorandum:03/08/2013
Expiration Date:
Signed By:Coleman, Robert
FCA Contact Person:Cohn, Jennifer
Contact Phone:703-883-4028
List of Attachments:

Printer-friendly Version => IM-ATRQM_RegZ_08March2013.pdfIM-ATRQM_RegZ_08March2013.pdf

March 8, 2013

To: Chief Executive Officer
All Farm Credit System Institutions
From: Samuel R. Coleman, Director and Chief Examiner
Office of Examination

Subject: Ability-to-Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z)

The purpose of this Informational Memorandum is to provide information regarding a final rule recently adopted by the Consumer Financial Protection Bureau (CFPB) that revises Regulation Z (Truth in Lending), at 12 CFR Part 1026. The rule, which was published in the Federal Register at 78 FR 6408 on January 30, 2013, adopts Ability-to-Repay and Qualified Mortgage Standards. The rule applies only to loans that are subject to the Truth in Lending Act (TILA) and takes effect on January 10, 2014. All institutions should adopt appropriate procedures to ensure compliance with the rule.

The new Ability-to-Repay requirements contain the following provisions:

Lenders will be presumed to have complied with the Ability-to-Repay requirements if they issue Qualified Mortgages. Qualified Mortgages must have the following features:

Balloon-payment loans, when originated by such creditors, are considered Qualified Mortgages only if they:

The rule establishes two types of Qualified Mortgages that have different presumptions regarding compliance with the Ability-to-Repay requirements. The two types are:
The language of the final rule, together with a detailed summary of the rule, a summary of the rule for consumers, and other information about the rule, can be found on the CFPB’s website, at From the home page, go to the Law and Regulation section and click on Regulations. There you will find a list of all CFPB rules issued. When you click on the link to any rule, you will find a page that links to the text of that rule, along with a summary and other information about the rule.

The Farm Credit Administration is providing this information as a courtesy to keep you informed of issues that may affect your institution. This information should not be seen as a replacement for management's due diligence in monitoring issues that may affect your institution.

If you have any questions about this Informational Memorandum, please contact Jennifer A. Cohn, Senior Counsel, Office of General Counsel, at (703) 883-4028, or by email at; and/or Dan Fennewald, Director, Examination Policy Division, Office of Examination, at 952-259-0432, or by email at