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The Consumer Financial Protection Bureau said Thursday it was seeking additional comments on the ability-to-repay rule, dashing expectations that a final rule would come by the end of June.
May 31 -
Raj Date, the deputy director of the Consumer Financial Protection Bureau, said Friday that the agency wants to avoid creating "disincentives" for mortgage lenders and banks as part of the qualified mortgage rule.
April 20
WASHINGTON — Banks have a sympathetic new ally in their quest to ensure that mortgage rules are broadly written: Habitat for Humanity.
The non-profit homebuilder and lender is expressing concern about the potential impact of the so-called "qualified mortgage" rule on its ability to build homes for people in need.
John Snook, director of state and local relations for Habitat for Humanity, said Thursday that overly strict standards on borrower credit scores, employment history and down payments could shut his organization out of the mortgage market.
"A typical Habitat family is just so different than the kind of family that would walk into Bank of America and get a typical home loan," he said.
Habitat for Humanity builds about 4,500 homes nationally each year, and the homes' eventual owners get a Habitat mortgage about 99% of the time, according to Snook. The borrowers are generally people who cannot qualify for a commercial mortgage.
Habitat originates and services zero-interest loans that require borrowers to pay no more than 30% of their monthly income. The organization's foreclosure rate has remained below 2% during the foreclosure crisis, he said.
Snook noted that Habitat for Humanity was fine with the initial proposal from the Federal Reserve Board, and has had a positive dialogue with the Consumer Financial Protection Bureau, which is charged with writing the final rule.
But he added that concerns have come up as the rulemaking process has continued, and said the group is speaking out publicly because of the rule's large potential impact on Habitat's operations.
"The way we've come down is that the impact would be so severe that we're not taking any chances," Snook said.
Habitat for Humanity's concerns could potentially be addressed by carving out an exception in the new rules for non-profit lenders, or by writing all of the rules broadly enough to avoid impacting Habitat.
Because Habitat borrowers typically provide sweat equity, rather than a large down payment on their homes, the organization is pushing for flexibility on how a borrower's stake in the home is measured.
Republican members of the House consumer credit subcommittee raised Habitat's concerns Thursday at a hearing with Raj Date, the CFPB's deputy director.
Date responded that CFPB is still early enough in the process of writing the qualified mortgage rule that it has time to think about how to address Habitat's comments. The consumer agency plans to come out with a final rule before January.
In his written testimony, Date said that the CFPB is working to ensure that consumer are not sold mortgages they can't afford, while also minimizing the compliance burden to the extent possible.
"We want to craft a sensible rule that works for the market throughout the credit cycle, but we also want to be mindful of just how fragile and risk-averse the market seems to be today," he stated.
