Consumer Financial Protection Bureau director Richard Cordray spoke October 28 at the Mortgage Bankers of America annual convention. The chief topic was the CFPB’s upcoming Ability-to-Repay/Qualified Mortgage rule.
In his speech, Cordray closely echoed remarks made at the ABA convention the prior week. Highlighting the effort his agency has exerted, Cordray elaborated on differences between the CFPB’s new mortgage rules and Dodd-Frank’s Title XIV, which would have gone into effect in January. According to Cordray, the CFPB’s new rules are superior, not only because they are more nuanced (taking into account the size of an institution, for example), but also because of greater dialogue between the bureau and banks during the rule-writing process.
Speaking first on non-QM loans, Cordray said that there are many good, non-QM loans made “based on sound underwriting standards and routinely perform well over time.” Lenders who continue to abide by those standards “should continue to offer the same kinds of mortgages to borrowers whom they evaluate as posing reasonable credit risk – whether or not they meet the criteria to be classified as Qualified Mortgages.”
Cordray also praised the rule’s ability to deliver legal protections for QM loans. The CFPB “purposely drew bright lines to define the contours of a Qualified Mortgage,” forcing critics “to dream up hypothetical factual disputes about whether debts and income were correctly calculated in their efforts to criticize the rules or sow anxiety about them.”
Dodd-Frank’s Title XIV would have left much interpretation of new rules to be “fought out in the courts for years and years.” The CFPB, however, conducted research and solicited input from all interested parties, leading to “balanced conclusions about how to define a so-called Qualified Mortgage and tailor its legal consequences.”
Emphasizing the CFPB’s responsiveness to industry concerns and questions, Cordray denied that his agency would take the “classical governmental approach” of abandoning banks to figure out the new regulations on their own. Rather, the CFPB has taken great care to incorporate legitimate criticism and offer clarification of the rule, like last month’s interagency statement about QM loans and fair lending risk.
While highlighting the CFPB’s sensitivity to good-faith efforts in the rule’s early months, Cordray does not “believe the bureau’s regulatory implementation project should slow the readiness process at any lender or servicer.”
In conclusion, Cordray said that implementation of the rules is critical to “deliver the new protections intended for consumers and the certainty that the industry has been seeking,” ultimately producing “better outcomes for consumers, for honest businesses, and for the economy as a whole.”