Daniel Weickenand, CEO of the $531 million Orion Federal CreditUnion in Memphis, Tenn., told Congress Tuesday the CFPB's new qualified mortgage standards will cause his credit union toturn away many creditworthy borrowers.

“In today's lending environment, with interest rates at recordlows, margins on non-QM loans will be very narrow,” he said in hiswritten testimony before a House Financial Services subcommittee.“When you take into account the additional legal liabilityassociated with non-QM loans, this margin will be even narrower.While some institutions may start charging a premium on their loansto account for the additional risk associated with non-QMs, we donot feel this is in the best interest of our credit union, ourmembers and our community.”

Consequently, Weickenand said Orion FCU has decided to not offernon-QM loans.

“I cannot tell you how difficult this decision has been. Oriontakes great care in placing our members with the right mortgageproduct, and the QM standard will inevitably force us to turn manycreditworthy borrowers away,” he added.

The title of the hearing, which began at 10 a.m. Eastern Time inthe Rayburn House office building, was “How Prospectiveand Current Homeowners Will Be Harmed by the CFPB's QualifiedMortgage Rule.” Weickenand appeared as a witness on behalf ofNAFCU. Other witnesses include a community banker and the CEO ofQuicken Loans.

Weickenand said credit unions have had to add compliance staffand increase the workload on compliance officers to keep up withthe CFPB's new mortgage rules.

“Unfortunately, this takes away from resources that they couldbe dedicating to their members in services and loans. This iswhat NAFCU warned of during the financial reform debate and one ofthe reasons why we were the only trade association that opposed theCFPB having authority over credit unions,” he said, referring tothe Ability-to-Repay/QM rule that took effect on Jan. 10.

“The impact of this growing compliance burden is evident as thenumber of credit unions continues to decline, dropping by more than900 institutions since 2009. While there are a number of reasonsfor this decline, a main one is the increasing cost and complexityof complying with the ever-increasing onslaught of regulations,” headded.

Weickenand argued that credit unions were not the cause of thefinancial crisis and should not be “caught in the crosshairs ofregulations aimed at those entities that did.”

CUNA President/CEO Bill Cheney thanked the chairman of theSubcommittee on Financial Institutions and Consumer Credit ShellyMoore Capito (R-W.V.) and Ranking Member Gregory Meeks (D-N.Y.) forconducting the hearing.

“As Congress considers the impact the regulation will have, weurge you to examine two key issues: (1) whether financialinstitutions need protection from lawsuits brought by privateparties for a reasonable period of time after the effective date,and (2) whether credit unions ought to be subject to thisregulation in the first place,” he wrote to the subcommitteeTuesday.

Cheney said credit unions should be exempt from complying withthe QM rule.

“We do not believe that asset size and number of mortgages arewhat guides the underwriting of credit union mortgages; thestructure of credit unions, their historic mission to serve thebest interests of their members and their very low default anddelinquency rates are the significant distinguishing factors thatsupport an exemption for credit unions,” he wrote. “We urge theSubcommittee to encourage the CFPB to provide all credit unions anexemption from the QM rule. Moreover, we believe other communitybased financial institutions should be considered for similartreatment under the QM rule.”