A leading mortgage industry group will meet with the Consumer Financial Protection Bureau today to spell out industry concerns about new regulations set to take effect in January.
Representatives of the National Association of Mortgage Professionals (NAMB) were invited to a conference with the CFPB “to discuss the role the mortgage broker plays in the recovery of the nation’s (economy),” according to a NAMB news release.
”I think what the CFPB is trying to do, and this is operating without any sort of itinerary from the CFPB as to what the meeting is about, is to figure out exactly the best way to move forward,” NAMB President Donald Frommeyer said. “They’re trying to get a better handle on the situation and educate themselves as much as possible. The CFPB really wants to know how the entire mortgage process works and that is why they are seeking our opinions.”
The CFPB’s new regulations are scheduled to take effect Jan. 10. Of chief concern to many brokers is the “qualified mortgage” rule set to go into effect on that date. The QM rule states that a borrower’s total debt liability – including housing debt – shouldn’t exceed 43% of the borrower’s income. Mortgages that meet the QM rule come with some protections for the lender under the CFPB’s “Ability to Repay” regulations.
However, many lenders worry that the income requirements of QM will price many borrowers out of the market. While CFPB Director Richard Cordray insisted last week that “more than 95% of the loans being made in the current market will be QM,” an Oct. 17 study by risk management firm ComplianceEase estimated that more than one in five mortgages issued today wouldn’t make the grade. In addition, more than half of those loans would have fees that exceed the CFPB’s 3% cap, and loans that exceeded the cap typically exceeded it by more than $1,500. The rest had APRs too high to meet the QM standard.
“As currently written, the stringent requirements of the CFPB’s rules will force many brokers nationwide out of business,” the NAMB release stated. “NAMB seeks to continue to play a major role in the recovery of the U.S. housing market and the recovery of the American economy nationwide.”
Also meeting with the CFPB today are representatives of the National Association of Independent Housing Professionals, a fellow industry group. NAIHP is considering legal action against the CFPB over the new regulations. NAMB, however, has ruled out litigation.