When the Consumer Financial Protection Bureau (CFPB) finalized its ability-to-repay rule on Jan. 10, it left many in the industry concerned about liability and changes to the mortgage market in the future. One particular issue of concern is that, under the rule, a borrower has a significant amount of time available to raise an ability-to-repay violation as a defense in a foreclosure action. This has the potential to leave future mortgage note holders open to liability for an extended period of time.

Many laws contain statutes of limitations that place a time limit on how long a person can have a viable claim. For example, the statute of limitations for a RESPA Section 8(a) violation is one year. If a consumer believes that when they obtained their mortgage, the settlement service provider paid or received a kickback for a referral in violation of Section 8(a), that person has one year from the date of the closing to file a lawsuit. If they wait beyond one year, they can still file a suit, but their claim is no longer viable under the statute. The defendant can simply file a motion requesting the court dismiss the claim for being beyond the statute of limitations (or time-barred).

The issue with the CFPB’s ability-to-repay rule is that under the Dodd Frank Act, there is no statute of limitations for a claim of a violation of the rule’s requirements if the borrower brings the claim in a foreclosure action.