While individual U.S. banking members may have their hands full in coming months complying with the new federal qualified mortgage rules, the organization that represents them — the American Bankers Association — says it is pleased with the shape new lending rules took.
The ABA says it and a broad coalition of groups involved in housing strongly advocated that the Consumer Financial Protection Bureau structure qualified mortgage as a legal safe harbor, rather than a less reliable “rebuttable presumption,” which would have set less clearly defined protections. With safe harbor, loans that comply with the qualified mortgage rules are “non-rebuttable” and have safe harbor against borrower lawsuits that could occur after defaults.
The ABA said the CFPB also responded well to its urging that the Bureau craft a rule that encompasses a wide range of mortgage products and underwriting practices to protect credit availability. The final rule includes a “qualified mortgage” standard broad enough to encompass most current types of mortgages, the ABA said in a statement.
The ABA has less success when it joined its community banking counterpart, the Independent Community Bankers of America, and other groups back in November to seek a nine-to-12-month delay in implementing the qualified mortgage rules that went into effect Jan. 10.
The rules set a host of new loan standards, among them an income-to-debt ratio of 43 percent, limits on points and fees and bans on non-conforming loans such as balloon mortgages.
In its pleading, the community bankers, the ABA and a coalition of other partners said they understood the CFPB’s urgency, given the past abuses that have occurred in the mortgage market leading to the financial crisis. “Nevertheless, our members have provided safe and solid mortgage loans to consumers in their communities for decades and were not responsible for the abusive mortgage practices that led to these new requirements,” they said.
The new requirements demand significant changes for community banks and the mortgage industry’s third-party participants, including the software providers on which community banks rely, the coalition said. “Extending the mandatory compliance deadline will better enable community banks to fully comply with the requirements.”
While bankers didn’t get the delay they wanted, federal regulators did give assurances that following the more stringent underwriting standards of the qualified mortgage rules will not likely get banks in trouble over compliance with the Community Reinvestment Act, which seeks to prevent discrimination in lending.
In a December joint statement to bankers and their lawyers, the Board of Governors of the Federal Reserve, the FDIC, the National Credit Union Administration and the Office of the Comptroller of the Currency said: “From a consumer protection perspective, the agencies responsible for conducting CRA evaluations do not anticipate that institutions’ decisions to originate only qualified mortgages, absent other factors, would adversely affect their CRA evaluations.”
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