Small banks are concerned about the Consumer Financial Protection Bureau's enforcement potential over fair lending laws.
"The CFPB's clout is especially worrisome to residential real estate lenders, says Rod Alba, vice president of mortgage finance at the American Bankers Association. The bureau has released its final rule on qualified mortgages and ability-to-pay standards, providing great detail on a complex topic," writes American Banker's Andy Peters.
"We're receiving absolutely no guidance that is specific to the new regulations that will allow us to comply with the fair lending … standards that regulators are placing before us," Alba says.
Jeff Plagge, president and CEO of Northwest Financial in Arnolds Park, Iowa, states that community bankers believe the bureau is watching for violations tied to mortgages despite having no direct jurisdiction over the Fair Housing Act.
"The CFPB indirectly has a wide breadth of impact, which is the source of our angst," Plagge says. "Everyone thought that the CFPB would be about the big banks but, at the end of the day, it really has an impact across the industry."
Under the Dodd-Frank Act, the Department of Housing and Urban Development is responsible for rule making for the Fair Housing Act. But Dodd-Frank gave the CFPB supervisory, enforcement and rule making authority for the Equal Credit Opportunity Act.
Scott Nininger, senior vice president and director of risk management at Union First Market Bankshares in Richmond, Va., believes that the bureau's ban of most balloon payments is telling community banks they are a target.
"They're setting the tone," Nininger says. "Consumer protection is so broad and can cover so many things."
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