CFPB rules necessary to clean up sloppy practices: Cordray

by Adam Smith22 Oct 2013

CFPB director Richard Cordray has defended the bureau's mortgage rules, saying they will help to "clean up many sloppy" practices.

Speaking to the American Bankers Association Annual Convention in New Orleans, Cordray told attendees the rules devised by the CFPB were a necessity.

"The rules we put in place were desperately needed by the financial industry, because if we had failed to complete them, the status quo would not have remained in effect," he said.

In particular, Cordray claimed that existing Dodd-Frank provisions would have caused difficulty for lenders and originators if not for the CFPB QM rule and the organization's servicing rules.

"In many respects those requirements would have been impractical and more difficult for you to carry out than our mortgage rules. For example, under the statute you would not have been permitted to charge any points or fees on any loan on which you paid compensation to any loan originator, regardless of whether that was your own employee or a mortgage broker," Cordray claimed.

Cordray said the QM rule would "end many irresponsible lending practices", while the CFPB's servicing rules "contain provisions designed to clean up many sloppy and unsatisfactory practices". He defended the QM rule, claiming that original Dodd-Frank legislation would have been more onerous.

"The law also would not have provided a clear safe harbor against litigation to all prime QM loans, as our rules now do. And the law made no special provision for small creditors (those with $2 billion or less in assets and making 500 or fewer mortgages per year) by deeming as qualified mortgages all the loans they keep in their portfolios. We made this change in our rules to reflect our deeply held view that community banks did not engage in the kinds of irresponsible practices that gave rise to the financial crisis," Cordray said.

With the deadline for the new rules looming, Cordray said the CFPB would take a "sensitive" approach to monitoring compliance.

"We are all in this together, and so we appreciate the urgency that is being felt and the resources that are being mobilized to prepare for the approaching effective dates. Let me also assure you that our oversight of the new mortgage rules in the early months will be sensitive to the progress made by institutions that have been squarely focused on making good-faith efforts to come into substantial compliance on time."


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