Consumer agency readies new mortgage rules as banks seek more time
Banks including PNC Financial Services Group Inc., SunTrust Banks Inc. and BB&T Corp. are pushing the U.S. Consumer Financial Protection Bureau to give them a year to comply with new mortgage underwriting rules that could be released as early as this week.
The consumer bureau's so-called qualified mortgage regulation, which requires lenders to ensure a borrower's ability to repay, will be released in connection with a hearing in Baltimore scheduled for Jan. 10, according to two people briefed on the plans.
The qualified mortgage rule, mandated by Congress as part of the 2010 Dodd-Frank Act, is aimed at tightening lax underwriting that fueled the housing bubble. The regulations aim to protect consumers from mortgages they cannot afford by requiring lenders to take steps such as verifying income and assets. In return, lenders gain some protection from lawsuits.
Seven regional banks wrote to CFPB in recent weeks asking that rules be "sequenced" to minimize disruptions to mortgage lending. The banks proposed a final compliance date of Jan. 21, 2014, for the qualified mortgage rule.
A second hearing, in Atlanta on Jan. 17, will feature new rules on mortgage servicing to regulate how consumers interact with the companies, and what protections they can expect, according to the people briefed on the plans. In their letter, the banks sought a compliance date of July 21, 2014, for the servicing rules.
Jen Howard, a spokeswoman for the consumer bureau, declined to comment. The people briefed on the plans asked not to be identified because the plans haven't been made public.
Dodd-Frank requires completion of the qualified mortgage rules and some of the servicing rules the CFPB is finalizing by Jan. 21, 2013. The law authorizes the agency to give up to 12 months for implementation of the required rules.
The qualified mortgage rule will apply to mortgages in the underwriting phase. Servicing rules will cover major banks including Charlotte, North Carolina-based Bank of America Corp. and San Francisco-based Wells Fargo & Co., as well as non- depository companies such as Ocwen Financial Corp., based in West Palm Beach.
The regulation on qualified mortgages is likely to resemble a version the bureau vetted with other government agencies in October, one person said. That version imposed a range of underwriting requirements and extended a legal safe harbor to loans issued at prime interest rates to borrowers whose total debt-to-income ratio doesn't exceed 43 percent.
An early date, or a simultaneous compliance date for too many individual rules, would cause lender and servicers to consider "scaling back or discontinuing mortgage-related activity," seven regional banks wrote the bureau on Dec. 19. "This would be harmful to both consumers and the industry."