BOSTON—Richard Cordray, director of the Consumer Financial Protection Bureau, told credit unions today he is working to promote the kind of service model that CUs have always offered, and that CUs have no reason to fear new mortgage rules.
"Since its inception, the Consumer Financial Protection Bureau has enjoyed a relationship with credit unions based on mutual respect and a common understanding of who it is we serve—the people of this country," said Cordray, speaking here as part of NAFCU's Annual Convention. "Credit unions were the true consumer protectors long before the CFPB was conceived."
Much of Cordray's remarks were focused on reassuring CUs that they should not fear the bureau's new Qualified Mortgage Rule, aka "the ability-to-repay rule."
"I know that such a regulation probably sounds quite foreign to credit unions—why would you lend money that someone could not pay back?" said Cordray. He reminded that qualified mortgages must not contain certain features, including negative amortization, specific point and fee structures, or add up to more than 43% of a consumer's monthly gross income.
While no standard is perfect, he said, this rule provides a clear line that will provide greater protection to consumers. On top of that, the current mortgage market—in which the pendulum has swung from extremely looseness of credit to a tighter market where is often difficult for credit-worthy consumers to get a loan—"creates a window of opportunity for credit unions that helped write the book on what it means to underwrite responsibly."
Aside from the QM rule, Cordray noted that there is plenty of opportunity for responsible lending outside of the qualified mortgage space, and the CFP encourages offering mortgages to those that provide reasonable credit risk. "Those that have (made loans) responsibly have no reason to fear the ability-to-repay rule," he said, adding that if sound underwriting is in place and loans have strong performance, QM or non-QM status shouldn't matter.
Cordray pointed out that some lenders may only want to lend within the qualified mortgage space for fear of reaction from regulators, but Cordray reminded that "I'm a regulator," and said CUs should not hold back from lending practices they know are sound.
Cordray—who has outgoing NAFCU Director Fred Becker's cell phone number and is said to have regularly used it to consult him—said that NAFCU is working to organize large conference calls to better communicate CFPB analysis on the QM rule.
Cordray also reminded that while the QM rule may be seen as onerous by some, it is an improvement on certain Dodd-Frank regulations that would have taken effect had the rule not been written—regs that would have been less responsive to CU concerns.
