Industry group protesting to CFPB, considering legal action

by Ryan Smith04 Nov 2013

A mortgage industry group will meet with the head of the Consumer Financial Protection Bureau this week to protest new regulations set to take effect in January.

Representatives of the National Association of Independent Housing Professionals will meet Nov. 5 with CFPB Director Richard Cordray in Washington, according to an NAIHP news release.

“At issue will be the (qualified mortgage) rule and its harmful effects on consumers and Main Street,” said NAIHP President Marc Savitt.

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 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.

The NAIHP also takes issue with the CFPB’s fee structure – and particularly the regulatory disparity between brokers and mortgage bankers or bank loan officers, who don’t have to abide by the same fee reporting regulations.

“NAIHP supports early, transparent and equal disclosure for all consumers,” Savitt said. “Without equal disclosure by all originators, consumers may unfortunately select a loan with higher costs.”

The NAIHP has considered legal action against the CFPB over the new rules, according to the news release, but “remains hopeful a solution can be worked out with the agency, avoiding litigation.”

If there is litigation, NAIHP won’t be joined by the National Association of Mortgage (NAMB) Professionals, another industry group. “The board of directors and I have chosen not to pursue legal action,” NAMB President Don Frommeyer said at the group’s national conference last month.

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