WASHINGTON (2/25/13)-As the Consumer Financial Protection Bureau (CFPB) considers exempting some lenders from its newly adopted ability-to-repay mortgage rule, the Credit Union National Association encouraged the bureau to exempt all credit unions.
The CFPB is considering amendments for two final actions it took recently; something the bureau has done before, but highly unusual for a federal agency.
In addition to looking at ability-to-pay rule exemptions, the bureau is considering a change to the associated Qualified Mortgage (QM) definition to permit more loans, under certain conditions, to qualify as QMs.
The CFPB is studying the amendments to its new rules hoping to ensure the continued flow of available housing credit, while minimizing some of the compliance burdens, for certain institutions, created by the ability-to-repay standards.
"Given the mission and nature of credit unions, their distinctions from other institutions as financial cooperatives, their history of serving their members, their low mortgage delinquency and default rates, their focus on financial education and their traditional efforts to ensure mortgage loans granted to consumers can be repaid, we urge the CFPB to allow many more, if not all, credit union mortgage lenders to be exempt from the ability- to-repay provisions," wrote CUNA Deputy General Counsel Mary Dunn in a comment letter due today.
The ability-to-repay rule, with its associated QM definition, were ordered by the Dodd-Frank Act and are intended to curb abusive lending practices, like those that lead to the nation's housing market crash, and to allow responsible lending practices to "flourish."
Arguing for the all-out exemption of credit unions, CUNA highlighted that "there is no demonstrated history of abuse in terms of credit unions making mortgages without appropriate analyses of the borrower's ability to repay."
"As a result, there is no demonstrated pattern of abuse to correct regarding credit unions as there is in other sectors of the financial services industry. In fact, credit union lower default and delinquency rates regarding mortgages provide a strong indication that credit unions have historically underwritten loans with the long-term interest of the member and consumer in mind," the CUNA letter reminded.
If not a total exemption for credit unions, CUNA recommends these other burden-reducing changes:
- All credit union that are either Community Development Financial Institutuions or Low-Income credit unions should qualify for the exemption; and
- If the agency concludes it cannot expand the exemptions to include all credit union mortgage lenders, then it should fully consider exempting credit unions and similarly situated mortgage lenders from a 43% debt-to-income ratio provision and the requirements that points and fees include mortgage loan originator compensation.
Additionally, CUNA urged the agency to establish a process under which all not-for-profit institutions, including credit unions, could be considered on a case-by-case basis for additional time beyond the January 2014 deadline to comply.