CFPB Leaning Toward Safe Harbor?
The Consumer Financial Protection Bureau (CFPB) is leaning toward providing “full legal protection” to lenders who provide qualified mortgages, according to an article in the Wall Street Journal. If true, this would be an important victory for lenders including credit unions that have argued that they should be given a safe harbor for providing mortgages that comply with Dodd-Frank’s underwriting requirements.
Under Dodd-Frank, Congress intended to give lenders added legal protection in return for meeting certain underwriting requirements. However, when the Federal Reserve Board initially proposed regulations, it concluded it was unclear whether lenders that provided qualified mortgages should be presumptively protected from legal liability for mortgages that go bad, or were intended to be given full legal protection (i.e. a safe harbor). As I pointed out in a recent blog, Director Cordray suggested to the Senate Banking Committee that he was skeptical of the value of a safe harbor since lenders could still be sued over whether or not a bank’s actions qualified it for receiving full legal immunity from lawsuits. Consequently, today’s article would seem to signal an evolution in the CFPB’s thinking.