RSSPresident Donald Trump last week directed federal regulators — including the Consumer Financial Protection Bureau — to cut back on mortgage regulations to enable greater community bank involvement in the sector.
Trump’s executive order, issued March 13, directed changes to Regulation Z of the Truth in Lending Act to tailor ‘ability-to-replay’ and a potentially broader portfolio loan safe harbor for qualified mortgages. Trump’s order would exempt — or in some cases modify — small-mortgage loans from limits on qualified mortgage points and fees.
Trump called on federal regulators to tailor community bank mortgage capital regulations regarding portfolio mortgages, servicing rights and warehouse lines of credit. The CFPB was directed to consider changes to Regulation C of the Home Mortgage Disclosure Act to raise the asset limit for exemption from data collection and reporting requirements for community banks.
“Good-faith, technical compliance errors are subject to correction-first supervisory treatment, with enforcement reserved for borrower harm or repeated misconduct,” the order states.
Trump said the Dodd-Frank Act and other rules have raised the compliance costs of originating and servicing mortgages and changed the structure of the mortgage market. “The regulatory and rule changes have undermined community banks’ businesses, concentrated credit and liquidity risk outside the banking system, and resulted in reduced access to credit for some creditworthy borrowers, including rural households and low- and moderate-income households,” Trump wrote.
Trump’s order came after Federal Reserve Vice Chair for Supervision Michelle Bowman said in February that the Fed would soon propose removing the mandate to deduct mortgage servicing assets from regulatory capital while keeping the 250 percent risk weight on those assets. Another proposal she expected would raise the risk sensitivity of capital requirements for mortgage loans on bank books.
