Just when lenders might have thought they were protected from ability to repay (ATR) loans because originating qualified mortgages (QMs) provided safe harbor, it turns out that under the Truth in Lending law a borrower can allege the lender engaged in unfair and deceptive acts (UDAP) that led to the loan being unaffordable. Thus, a borrower who pursues an ATR claim, which is typically a narrow scope of discovery, and therefore relatively inexpensive for the lender to defend, can allege a pattern of wrongdoing under UDAP, which broadens the discovery, and thereby the cost of legal fees for the lender. According to what nationalmortgagenews.com tells MHProNews, while the Consumer Financial Protection Bureau (CFPB) sought to protect lenders with the QM rule, it opened the floodgates allowing borrowers to potentially pursue lenders because of the ambiguous definition of UDAP. The bottom line: Applying UDAP to unaffordable lending turns the safe harbor into a possible very rocky shoreline, expensive to navigate. ##
