WASHINGTON Consumer Financial Protection Bureau Director Richard Cordray said Tuesday that some lenders' concerns about meeting the deadline for new mortgage rules are warranted but not their fears over legal protections in complying with the regulations.
In a speech to the Mortgage Bankers Association's annual conference in Washington, Cordray said the agency's supervision team "will be sensitive" to lenders in the months following the effective date of the new mortgage rules including the Qualified Mortgage rule so long as lenders make "good-faith efforts" to be in compliance by Jan. 10.
"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 prepared remarks. "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."
Industry advocates have been pushing the CFPB in recent months to extend the deadline for the QM rule in order to get lenders and their third-party providers in compliance. While the agency has not relented on the date, officials have begun to offer some verbal flexibility during early examinations. But the CFPB is hard-pressed to get the rules out in a timely manner as Cordray has repeatedly reminded lenders that it would have been worse had the agency not stuck to its own deadline under the Dodd-Frank Act.
"We understand this poses a challenge for industry, just as the writing of such a substantial set of mortgage rules by last January posed a significant challenge for our new agency," he said. "Had we failed to do so, many key statutory provisions that Congress had enacted in Title XIV of the Dodd-Frank Act would have taken effect in their own right, which everyone recognizes would have been much harder on industry and much worse for the mortgage market."
Cordray spent half of his speech trying to debunk lenders' fears that they would violate fair lending laws by choosing to write only the safest QM loans; or that they would run into other legal risks under the so-called safe harbor protection. Some lawyers and consultants have said that the numerous requirements within the QM rule gives a borrower more options to sue the lender in arguing a loan was not a qualified mortgage, threatening the safe harbor protection for lenders. But Cordray said the agency "strongly" believes the safe harbor will keep banks safe from such legal actions, arguing the temporary allowance for GSE-approved loans and the 3% cap on points-and-fees is broad enough to cover most loans.
"The key point here is that we left little room for legal challenges to whether a given mortgage is a QM," he said. "We crafted the rule to avoid that result, which is why critics are now forced to dream up hypothetical factual disputes about whether debts and income were correctly calculated in their efforts to criticize the rules or sow anxiety about them."