WASHINGTON — More than a quarter of House lawmakers are asking the Consumer Financial Protection Bureau to delay implementation of its "qualified mortgage" rule, arguing that many smaller institutions are not going to be ready on time.
In a letter signed by 118 House Republicans, many of which are members of the House Financial Services Committee, the lawmakers noted that the regulation and its amendments total more than 4,000 pages and go into effect in January.
"This task [of compliance] is especially difficult for community financial institutions that may only have one or two compliance officers," says the letter, which is dated Nov. 5 and signed by Rep. Shelley Moore Capito, the chairman of the House financial institutions subcommittee, among others. "Furthermore, many financial institutions rely on software systems for managing their operations. We have heard concerns from many community financial institutions that they simply will not be able to meet the January 2014 deadline to have their systems on line and in place."
The lawmakers asked that the CFPB delay the rule's effective date until January 2015, saying the market will be hurt if lenders cannot comply on time.
"If financial institutions are unable to comply with these rules by the January 2014 deadline there could be significant distortions in the mortgage market affecting the availability of credit for consumers," the letter says. "Therefore, we urge you to defer implementation of these rules until January 1, 2015 in order to ensure financial institutions are able to transition their systems to be in full compliance with the rules."
Small banks and credit unions have been fiercely pushing back against the CFPB's timeline for its new mortgage rules, which require institutions to ensure borrowers have the ability to repay a mortgage. As part of the new regulations, the CFPB created an ultra-safe class of loans known as qualified mortgages which must meet certain underwriting criteria, including debt-to-income requirements.
The CFPB has made several adjustments to the rules, including issuing amendments, the most recent of which was released in September. But many lenders have said they don't have enough time to adjust to these changes.
While CFPB Director Richard Cordray has not given any sign the agency will back off its implementation timeline, he has pledged that it will be flexible in how it enforces the new rules. Essentially, Cordray has said that if institutions are making "good faith" efforts to comply with the mortgage rules, examiners will take that into account.
"We are all in this together, and so we appreciate the urgency and the resources that the mortgage industry is bringing to bear in preparation for the approaching effective dates," Cordray said in a speech last month. "Let me also say that our oversight of the new mortgage rules in the early months will be sensitive to the progress made by those lenders and servicers who have been squarely focused on making good-faith efforts to come into substantial compliance on time — a point that we have also been discussing with our fellow regulators."