CFPB's QM Reg Relief Not Enough: Mortgage Execs
Credit union mortgage executives lauded the CFPB's proposed addition to its qualified mortgage rule that would allow issuers to correct good faith mistakes in calculating points and fees.
However, they also said the bureau needs to do more.
Under current rules, a qualified mortgage cannot charge the borrower points and fees of more than 3% of the loan's face amount, minus closing costs, on loans with more than $100,000 in face value.
The CFPB proposed to allow QM mortgage issuers that inadvertently overcharge borrowers to repay the amount without losing the loan’s QM status.
Tracy Ashfield, EVP with the Madison, Wis.-based Strategic Mortgage Solutions made a point of praising the CFPB for listening to the industry's concerns about the cap. However, she said she doubted whether the change would make much of a difference to mortgage operations at most credit unions.
Ashfield said many credit unions have already committed to underwriting some non-QM mortgages and may not be concerned about going over the points and fees cap as other lenders.
She also suggested that the cap fix pales in comparison to the regulatory relief credit unions could have experienced had the CFPB removed money paid to CUSOs from the points and fees calculation.
Under the current rule, if a credit union owns at least 25% of a CUSO it uses for mortgage underwriting, any fees the borrower pays to that CUSO must be counted toward the cap.
Ashfield pointed out this effectively hurts the member, because while a credit union title CUSO might be significantly less expensive than others available, using the CUSO might take the loan over the 3% cap. The credit union could potential send the member to an alternate service provider even though that product may be more expensive.
NAFCU Director of Regulatory Affairs Michael Coleman agreed with Ashfield, but also noted that the CUSO requirement is statutory and not just in regulation.
“We appreciate the CFPB’s review of mortgage rules in order to afford credit unions some regulatory relief while allowing them to continue to offer mortgages to their members,” Coleman said. “However, more work needs to be done regarding the rules’ treatment of points and fees and other areas of the mortgage rules.”
Dennis Hardiman, CEO of Embrace Home Loans, a Newport, R.I.-based independent mortgage firm that has started offering mortgage services to credit unions, also praised the agency for listening to the mortgage industry.
But he also advocated for additional changes.
“A real change in the cap,” he pointed out, “would raise the face value of the loans that are subject to it. Make it at least $150,000 or even $200,000. That would be a lot closer to a figure where you could keep excessive fees from creeping in but still not depress the ability to make the loans at a reasonable profit,” he contended.