Credit Unions Should Not Fear New Mortgage Rules, CFPB Chief Says

Credit Unions Should Not Fear New Mortgage Rules, CFPB Chief SaysLending standards in the mortgage market are so strict that even creditworthy applicants are getting denied the best rates, says the director of the top U.S. consumer watdcog agency.
This is creating a window opportunity for credit unions that helped “write the book” on responsible lending, said Richard Cordray, head of the Consumer Financial Protection Bureau in remarks this past week before the National Association of Federal Credit Unions’ annual conference.
“Those that lend responsibly – like almost all credit unions – have no reason to fear the Ability-to-Repay rule,” Cordray said.
New mortgage rules are set to take effect in 2014 outlining minimum requirements for creditors making “ability-to-repay” determinations.
Credit unions have voiced their concerns about how tougher rules could impact smaller lenders in the market.
“Credit unions find ways to make loans that respond to personal situations and cannot be captured by generic metrics,” Cordray said. “Credit unions depend on keeping a good reputation among their members – who are, after all, their owners, and they often hold those loans in their own portfolio.”
Cordray told credit union managers that “we want you to have confidence in your strong underwriting standards, and not to hold back from making loans you know are sound.”
The CFPB’s new rules also require that portfolio loans made by small lenders – including those operating outside of rural or underserved areas – be generally treated as “Qualified Mortgages” — even if the loans exceed the 43 percent debt-to-income ratio. The loans must meet the product feature and other requirements for Qualified Mortgages.
However, the rules provide exemptions for smaller institutions like credit unions. For firms that service 5,000 or fewer mortgage loans, which were originated or owned by the servicer itself or its affiliates, there are special provisions exempting them from many of the servicing rules.
“We estimate that this covers about 98 percent of credit unions, exempting them from, among other provisions, the periodic statement requirement, the general servicing policies and procedures, and most of the loss mitigation provisions,” Cordray said.

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