During the Credit Union National Association conference on Wednesday, Richard Cordray, the director of the Consumer Financial Protection Bureau, said smaller financial institutions should lend beyond a new ultrasafe class of mortgages created by the agency.
"Cordray acknowledged fears that lenders will not make mortgages that are not considered 'qualified mortgages' under the agency's rule that requires lenders to ensure borrowers have the ability to repay a loan," writes American Banker's Rachel Witkowski.
"Plenty of responsible lending remains available outside of the qualified mortgage space, and we encourage you to continue to offer mortgages to those borrowers you can evaluate as posing reasonable credit risk," Cordray told the attendees. "Those that lend responsibly - like credit unions - have no reason to fear the ability-to-repay rule."
Cordray encouraged the credit union representatives to step outside of the rules by making loans to low-risk borrowers as well as balloon loans. Even though the CFPB, created under the 2010 Dodd-Frank reform law, provides a specific exemption for smaller lenders in rural areas regarding balloon loans, banks and credit unions have feared the rules will indirectly become a common standard for them.
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