D-Day for Mortgage Lending

by State of Mind

by Henry Meier

Today’s the day that the CFPB rolls out its qualified mortgage regulations as mandated by Dodd-Frank and, although I haven’t yet seen a copy of the regulations and the devil is always in the details, there is reason to be cautiously optimistic about the new lending requirements.  Here are what some of the press reports are saying so far:

  • The Dodd-Frank Act established criteria for what constitutes a qualified mortgage and left it up to the CFPB to flesh out the details.  The big question was whether lenders who provide mortgages meeting these criteria would be given a safe-harbor or total shield from liability or simply presumption that they acted properly in giving a borrower a loan that went sour.  Despite the fact that CFPB Director Richard Cordray has expressed some skepticism about the safe-harbor concept, if press reports are accurate, qualified mortgages will get safe-harbor protection.
  • One of the key criteria to be set by the CFPB is the debt-to-income ratio necessary to qualify for a qualified mortgage.  That figure will be set at mortgages no greater than 43% of a member’s gross monthly income.
  • Financial institutions will have until 2014 to start complying with these requirements.

While this is all good news, Dodd-Frank intended to impact virtually every aspect of the mortgage lending business.  When all the regulations are finally rolled out in the coming weeks, credit unions providing mortgages will see virtually every aspect of their operations from servicing to underwriting to sales to the secondary market impact by these regulations irrespective of their ultimate details.  Consequently, pay attention to what Richard Cordray says in a speech later today and get your compliance geeks on the look-out so that they can start reading the regulations as soon as they are released to the general public.  I know that’s what I will be doing.

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