WASHINGTON — Raj Date, the deputy director of the Consumer Financial Protection Bureau, assured financial industry representatives Tuesday that the agency is carefully weighing access to consumer credit as it finalizes the qualified mortgage rule.
The CFPB is expected to release a final rule by the end of June that would require lenders to verify a borrower's ability to repay a mortgage, unless they make a loan that falls under the definition of a "qualified mortgage."
Consumer groups have been at odds with the banking industry over the kinds of legal protections lenders should receive for making such loans, with industry groups arguing that weaker protections could mean tighter standards and fewer mortgages made.
Preserving access to credit is central to the bureau's mandate, "and something we take very seriously," Date said at a symposium hosted by the Women in Housing & Finance in Washington.
"In my opinion, the entire point of a private sector, competitive market for consumer credit is that credit is calibrated, risk is calibrated, and priced in an efficient and competitive way," he said. "You can say many things about the mortgage market during the bubble, but you can't say that. So getting to a place where that does happen is very much in everyone's interest, and certainly in the bureau's."
The Federal Reserve, which initially proposed the rule before it was transferred to the bureau last year, offered two alternative QM proposals, with differing protections from liability for lenders. One would provide a total safe harbor from liability — favored by the industry — while the other would provide a "rebuttable presumption" protection.
Date would not comment on which alternative the bureau was leaning toward.
"I can assure you that that issue has been quite thoroughly briefed …and one that we are pretty attentive to in working on this," he said.
Date said most of the bureau's immediate rulemaking priorities are focused on the mortgage market this year.
Those include the integration of mortgage disclosure forms, development of national servicing standards, new disclosure requirements for monthly mortgage statements, notices regarding hazard insurance and force-placed insurance, new requirements related to escrow accounts and error resolution practices. Those rules are due by January 2013.
"These are all rulemakings under Dodd-Frank that are underway right now," said Peter Carroll, the agency's acting assistant director for the office of mortgage markets, who also addressed the symposium. "We are in the process of working on proposed rules."
The bureau is also working on rules related to adjustable rate mortgages, appraiser independence compensation, mortgage loan originator compensation and new requirements under Dodd-Frank for the Home Mortgage Disclosure Act.
"While there is no deadline for this rulemaking, we are going to start looking at the issues associated with enhancing HMDA soon," Carroll said.
Carroll said the bureau has received more than 27,000 comments on its Know Before You Owe initiative, which would merge the good faith estimate with the Truth In Lending Act disclosure. The bureau convened its first panel required by the Small Business Regulatory Fairness Act, and plans to release the final rule shortly after that process is complete, he said.
Asked about other activities, Date said CFPB is approaching its work in three different areas: rules that have defined deadlines in the near-term, long-term foundational work, and the work in between that involves gathering more information about certain markets.
"There are a number of marketplaces and issues where there is at least some conception that there may be risk of consumer harm, but not a great calibration of its magnitude and its cost," he said. "That's where I would put something like the overdraft issue, where we absolutely are doing work to better define what's going on with the marketplace, how has it changed, what recent regulatory movements have worked and functioned as anticipated, what has been unintended, and where it can be fixed."
For example, Date noted that the CFPB released a paper on credit reporting and credit scoring systems several months ago, which he said is the first installment of work it plans to do in that area, including looking at how well those systems function across different tiers of the market.
"That's the kind of primary work that really can, if done right, sort of ground fundamentally how it is that the agency thinks about problems," he said.