Qualified Mortgages for Dummies

April 11, 2013 at 7:51 am 8 comments

imagesCAE8SBUOTrue to its word, the CFPB released a guide to implementing the qualified mortgage regulations.  The guide is the first of several the Bureau plans to release to help lenders, particularly small lenders, comply with the myriad of mortgage regulations to be phased in over the next year.  If Siskel and Ebert reviewed regulations instead of the latest movies, they would give it a posthumous two thumbs up.  Here are some additional thoughts.

  • The guide is intended to assist lenders in implementing the qualified mortgage regulations.  It is not intended to be, nor is it a substitute for sitting down and struggling through the actual regulations.  In other words, it’s a great document for someone who needs to get a general overview of the regulations and it is a useful supplement for the person responsible for implementing the regulations.
  • The manual is filled with implementation suggestions, but I love the list of practical considerations at the very end of the guidance.  For instance, if you haven’t already done so, you should be identifying the products and staff that will play a role in implementing the new mortgage regulations as a whole.  As Pamela Stephens pointed out in testifying before Congress yesterday, many credit union staff persons wear several hats, so it is crucial to get everyone in the same room and start thinking about who is going to be responsible for implementing the new requirements.  The CFPB also points out that you should be reaching out to vendors and clarifying in your contracts and policies precisely what it is they can provide you and what it is that they are guaranteeing.  For instance, one thing I would ask your vendor is how quickly software can be adjusted to account for new calculations of points and fees.
  • The manual also does a great job of laying out the underwriting steps that lenders should take when determining a borrowers ability to repay a mortgage loan.  I was talking about this particular section with one of my compliance comrades in the office yesterday and the reality is that it isn’t just lawyers who have never done mortgage underwriting before.  Because of technology and the prevalence of secondary market standards you have an increasingly large number of underwriters who have never underwritten so much as determined whether or not a loan meets these standards.
  • One more thought before I let you get on with your day.  If you look at the basic criteria that credit unions are expected to look at when determining whether or not someone has the ability to repay a mortgage, it is criteria that most credit unions have already been using.  The most burdensome aspect of these new mortgage regulations for credit unions will be implementing and actually utilizing policies and procedures that document why it is you made the decision you did on a given loan.  For instance, right now you may have a policy of underwriting to secondary market standards.  However, do you have a policy explaining when you will grant a mortgage that doesn’t meet these standards?  Is this policy consistently implemented?  These are the types of questions you should be asking yourself and CFPB’s helpful document can help jumpstart that discussion.

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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