Fed: CFPB rules causing banks to cut back on lending

by Ryan Smith06 Aug 2014
Banks are cutting back on mortgages because of Consumer Financial Protection Bureau regulations, according to the Federal Reserve.

The Fed’s senior loan officer opinion survey showed that banks – with the exception of some large lending institutions – were granting fewer loans because of CFPB regulations.

“Only a small fraction of large banks indicated in the survey that the new rule has affected their approval rate for prime conforming mortgages, while a substantial share of the other respondents reported that the rules were lowering their approval rates on such loans,” the Fed said in a report on the survey.

Of the large US banks that responded to the survey, 19% said they approved fewer prime mortgages under the CFPB’s rules than they would have otherwise. If the principal balance was greater than the conforming loan limit, that number jumped to 44%.

“Among those banks that reported the rule had no effect on their approval rates, roughly half said that lending policies would have been tighter without the safe harbor for mortgages that pass (Fannie and Freddie) automated underwriting models,” the survey said.


Should CFPB have more supervision over credit agencies?