CFPB Proposes Small Creditor Mortgage Relief

Yesterday brought us another example of the CFPB at its best. It proposed several amendments to its mortgage rules that will make it easier for institutions to quality as small creditors for purposes of the mortgage rules. This designation is important because it is easier for smaller institutions to make qualified mortgages than it is for their larger counterparts. For example, small creditors aren’t subject to stringent debt to income ratio requirements.

Under existing law, to qualify as a small creditor an institution must make 500 or fewer mortgages in a calendar year and have $2 billion or less in assets. The CFPB is proposing to raise that threshold from 500 to 2,000 mortgages. In addition, creditors that reach the magical 2,000 threshold will be given a grace period so they have time to adjust to the tougher QM standards.

In addition, according to the preamble, the Bureau’s proposal “also makes the limit applicable only to loans not held in portfolios by the creditor or its affiliates.” This clarifies that a loan transferred by a creditor to its affiliates does not count toward the threshold limit as long as the affiliate doesn’t subsequently sell the mortgage.  The proposal also expands the definition of rural areas, which is helpful for QM purposes. On the negative side, the proposal would include the assets of a creditor’s mortgage originating affiliate(s) for purposes of calculating the $2 billion threshold.

Say what you want about the Bureau. It not only talks the talk, it walks the walk. It estimates that this proposal would expand the number of institutions that qualify as small creditors from 9,700 to about 10,400. The Bureau has been handed the unenviable task of strengthening mortgage underwriting standards without dramatically decreasing the number of people who ultimately qualify for a mortgage. To be sure, you won’t find this mandate in statute, but the American public and the politicians they elect are still inclined to believe that you can raise mortgage standards without keeping people from owning the home of their dreams. The Bureau’s the only agency I know that assiduously monitors the impact of its regulations on an ongoing basis and moves swiftly when it sees that its proposals have gone too far. Here’s a link to the proposal.

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I’ll be back blogging on Tuesday as I am taking Monday off so that I don’t have to rush back from Long Island after celebrating at the 39^th Annual Meier Family Superbowl Party.