Statement on Proposed Changes to Mortgage Rules
WASHINGTON, D.C. – February 2, 2015 – (RealEstateRama) — The Conference of State Bank Supervisors (CSBS) strongly supports the CFPB’s willingness to propose changes to its mortgage rules to provide more exemptions for small creditors and new safe harbor provisions related to rural or underserved markets. If enacted as proposed, the revisions would give more banks flexibility to make loans to their customers, show discretion in credit decisions, and engage in relationship lending.
Since the original Ability to Repay/Qualified Mortgage (QM) proposal was introduced in 2011, state regulators have called for a flexible supervisory approach that recognizes the portfolio-lending business model of community banks.
CSBS has long-standing policy that regulations should not hinder a bank’s willingness to engage in portfolio lending, and this proposal would make it easier for institutions to extend credit and serve their customers. The proposal correctly acknowledges the aligned interest between small creditors that portfolio mortgage loans with consumer protection, and recognizes the strong incentives portfolio lenders have to consider a borrower’s ability to repay a loan.
Today’s announcement is a clear indication the CFPB has been receptive to feedback provided by state regulators, Members of Congress, and the industry. Today’s proposal demonstrates a willingness by the CFPB to tailor regulations to a bank’s business model.
Despite this positive step, there is still a need for regulatory or legislative action to ensure we have a right-sized and appropriate regulatory framework that meets the needs of local communities.
The Dodd-Frank Act requires mortgage creditors to determine a borrower’s ability to repay based on defined borrower factors, such as income, employment, and other debts. The Qualified Mortgage, or “QM,” limits a creditor’s exposure to liability from these requirements by creating a safe harbor or a presumption of compliance with the requirements if certain factors are considered in the repayment determination.
In June 2013 testimony before the Financial Institutions and Consumer Credit Subcommittee of the House Financial Services Committee, the Chairman of CSBS testified on the perils of one-size-regulation and raised concerns with the CFPB’s final Ability-to-Repay and QM rule, emphasizing the importance of portfolio lending for the community bank business model. The testimony is available here. A press release on the testimony is available here.
In a March 2013 letter to the CFPB, CSBS recommended the CFPB implement a rural designation petition process. The letter is available here. A press release on the letter is available here.
In a February 2013 letter to the CFPB, CSBS, the American Association of Residential Mortgage Regulators (AARMR), and the American Council of State Savings Supervisors (ACSSS) offered support for the CFPB’s small creditor QM as the proper approach to many regulatory issues facing small creditors. The letter is available here. A press release on the letter is available here.
In a July 2011 letter to the Federal Reserve Board on the original proposed rule to implement the Ability-to-Repay provisions of the Dodd-Frank Act, CSBS offered support for requiring creditors to consider and verify borrower information before extending a mortgage loan. CSBS did raise concerns with the criteria for the Balloon QM and called for the statutory exception for balloon QMs to be extended to all banks that portfolio balloon mortgages. The letter is available here. A press release on the letter is available here.
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Catherine Woody, Vice President of Media and Industry Relations, or 202.728.5733
Rockhelle Johnson, Senior Manager, Communications, or 202.407.7156
Matt Longacre, Manager, Communications, or 202.803.8091
The Conference of State Bank Supervisors (CSBS) is the nationwide organization of banking regulators from all 50 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands. State banking regulators supervise nearly 5,100 state?chartered financial institutions. Further, most state banking departments also regulate a variety of non-bank financial services providers, including mortgage lenders. For more than a century, CSBS has given state supervisors a national forum to coordinate supervision of their regulated entities and to develop regulatory policy. CSBS also provides training to state banking and financial regulators and represents its members before Congress and the federal financial regulatory agencies.
John W. Ryan
President and CEO
Conference of State Bank Supervisors