|November 6, 2013|
Previously published on November 5, 2013
On October 28th, CFPB Director Richard Cordray spoke at the Mortgage Bankers Association Annual Convention in Washington, D.C.1 Cordray’s speech touted the CFPB’s “open, inclusive, [and] transparent decision making” in crafting its Qualified Mortgage or Ability-to-Repay rule.
He sought to assuage anxiety about the impact of the rule on the mortgage industry. He noted that “the vast majority of loans made in today’s market” already meet the requirements for Qualified Mortgages. Furthermore, Cordray remarked that even loans that would not constitute Qualified Mortgages can still be “good” to the extent that they are “based on sound underwriting standards and routinely perform well over time.” As a result, he said, lenders making loans outside of the Qualified Mortgage safe harbor “that have long upheld such standards have little to fear from the Ability-to-Repay rule.” According to Cordray, “they should continue to offer the same kinds of mortgages to borrowers whom they evaluate as posing reasonable credit risk.”
Cordray also defended the Qualified Mortgage rule against critics who question its effectiveness and whether it is ripe for implementation. He dismissed a critique that the rule would not grant effective legal protections for lenders, noting that the rule, as drafted, would provide legal safe harbors for more than 95 percent of mortgage loans made in the current market. Furthermore, he noted that it draws the contours of such protection with “bright lines” to minimize opportunities for legal challenges that could erode the applicability of the rule over time.
Cordray also dismissed industry calls for more time to implement the rule, saying that the Bureau is working diligently to help industry understand and prepare for the rule. The fact that questions and concerns may still exist leading up to the effective date of the rule does not justify delaying the rule, Cordray said. Instead, Cordray asserted that the Bureau plans to continue to work closely with industry after the rule becomes effective to iron out remaining wrinkles. Furthermore, Cordray noted that the Bureau’s “oversight of the new mortgage rules in the early months will be sensitive to the progress made by those lenders and servicers who have been squarely focused on making good-faith efforts to come into substantial compliance on time - a point that we have also been discussing with our fellow regulators.”
1 See Director Cordray’s prepared remarks at http://www.consumerfinance.gov/newsroom/director-cordray-remarks-at-the-mortgage-bankers-association-annual-convention/.