On The Oscars And The CFPB

February 25, 2013 at 8:19 am Leave a comment

It makes absolutely no sense to give Argo the award for Best Picture, while refusing to even nominate Ben Afleck for Best Director.  It’s like saying you did a great job, but then passing out the raises to the other slubs in the office.  Come to think of it, it’s the type of things our well-intentioned friends at the CFPB would do.

Today’s the day comments are due on CFPB’s proposal to give certain institutions added flexibility while still qualifying for the full legal protection given to providers of so-called qualified mortgages.  Qualified mortgage protection is a big deal because if the system works as envisioned, so long as a lender can prove that a mortgage was underwritten in conformity with qualified mortgage standards, he will be given a safe harbor from legal actions such as foreclosure defenses and monetary damages.  The most important exemption that would be granted to credit unions and community banks would be exemption from 43% monthly debt-to-income ratio.  This is a big deal and I don’t want to sound ungrateful, but in order to qualify a credit union would have to have no more than $2 billion in assets, make no more than 500 covered mortgage transactions a year and hold them in its own portfolio.

Why?  CFPB Director Cordray has spoken passionately about the fact that credit unions and community banks have a unique connection to their membership that insulates them from many of the practices that necessitated the creation of the CFPB in the first place.  He recognizes the danger that increased regulatory burden and legal risks pose to the continuation of mortgage lending on the part of these institutions.  So why the Rube Goldberg like distinctions to qualify for exemptions?  By exempting all credit unions from these regulations as well as the recently promulgated servicing requirements, irrespective of size, and their loan portfolios, CFPB would be ensuring that credit unions don’t pay the price for problems for which they are not responsible and more importantly, would be ensuring that there is not a credit union that has to choose between complying with these new regulations and providing mortgages to their members.  Without a more forceful and clear-cut exemption, CFPB may very well end up diagnosing the problem without providing an adequate cure.

Entry filed under: Advocacy, Compliance, Regulatory. Tags: , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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