The CFPB has issued a proposed rule to amend its new mortgage rules, including changes to the ability-to-repay (ATR) and qualified mortgage (QM) rules.

The most significant change is a proposed “cure mechanism” for loans that are originated with the good faith expectation that they will qualify as QM loans, but which actually exceed the points and fees QM limit (which is 3% for most loans). The CFPB noted that inadvertent errors often crop up in the calculation of discount points, mortgage insurance premiums, and loan originator compensation. For creditors that inadvertently exceed the points and fees limits, the proposed cure mechanism would permit those creditors to refund the consumer the amount of the excess after the loan is consummated.

The CFPB’s proposal would impose several conditions on the proposed cure mechanism. If these conditions are met, a loan’s QM status will not be disqualified due to the inadvertent overage in the points and fees: (1) the creditor must originate the loan in “good faith” (as defined by the rule), (2) the creditor must refund the customer within 120 days after the loan consummation, and (3) the creditor must maintain and follow procedures for post-consummation review of loans and for refunding customers for overages.

Also, the CFPB is considering expanding this provision to cover creditors that inadvertently exceed the debt-to-income limit, meaning that the cure mechanism could also apply to loans originated in good faith as QMs that actually exceed the 43% debt-to-income QM limit.

The proposed rule also expands some of the exceptions that apply to nonprofit entities. The proposal would expand the “small servicer” exemption from the periodic statement requirements to nonprofit loan servicers, provided that they service only loans  for which the servicer or an associated nonprofit entity is the creditor. It also would amend the nonprofit exemption from the ability-to-repay rule, which applies only if a nonprofit creditors does not exceed 200 extensions of credit per year. The proposal would permit nonprofit creditors to provide unlimited interest-free, subordinate-lien loans, which would be excluded from the 200 limit on extensions of credit.

The proposed rule also announced that the CFPB will be proposing more amendments in the future to address the “rural and underserved” definition, among other issues. Comments on the proposed rule are due on June 5, 2014. Comments on other changes, such as expanding the cure mechanism to debt-to-income ratio overages, are due on July 7, 2014.