Mortgage Rule Delay
NEW YORK ( MainStreet) Twenty-five U.S. Senators sent a letter to Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), asking the bureau to hear the complaints of credit unions and other small institutions regarding pending mortgage regulations and even possibly delay implementation.
The letter, dated November 21, implored Cordray to reconsider the current start date, because credit unions and community banks would find it burdensome if not impossible to put into effect the myriad of rules. Specifically cited were the Ability to Repay and the Qualified Mortgage Standards of the Truth in Lending Act (Regulation Z). These rules, required by the Dodd-Frank Act, will go into effect January 2014.
"This new mortgage regulation places an undue burden on community banks and credit unions," said Roger Wicker (R.-Miss), the lead Senator of the initiative, told MainStreet. "Given the overwhelming complexity of the regulation, I believe it warrants further review by the CFPB before being implemented. The current January 2014 deadline for compliance is unrealistic. Director Cordray should take a closer look at the compliance obstacles facing our nation's community banks and credit unions, and provide them some relief by delaying its implementation."
The Credit Union National Association (CUNA) said in a release that it suggested that Congress grant a one-year extension of compliance deadlines. The organization also continued: "If such a delay cannot be created, Congress should provide credit unions with a buffer of at least six months as they work to come into compliance with qualified mortgage standards, CUNA has said. CUNA has also recommended that a similar six-month delay should also be applied to legal liability provisions of mortgage regulations."
The problem with smaller financial institutions is that they lack the resources to apply the necessary policies and procedures so quickly. They do not have the compliance officers or the software available to execute the changes by the deadline.
The Senators are warning that the failure by these smaller companies to be able comply with the pending regulations could lead to "market distortions" and such problems could "adversely affect the availability of mortgage credit for consumers" in several states, particularly in rural or remote areas of the country.
According to the CFPB, the amended Regulation Z prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer's ability to repay the loan. The final rule implements sections 1411 and 1412 of the Dodd-Frank Act. This requires creditors to make a reasonable, good faith determination of a consumer's ability to repay any consumer credit transaction secured by a dwelling and to establish certain protections from liability under this requirement for "qualified mortgages." Excluded from this are open-end credit plans, timeshare plans, reverse mortgages or temporary loans.