The Community Home Lenders Association recognizes that abuses that took place in the subprime era harmed consumers, housing markets, and the broader economy. While CHLA members largely avoided subprime lending, CHLA appreciates that laws to strengthen consumer protections and underwriting standards were warranted. However, CHLA believes that it is critical to implement these new provisions in a manner that does not inadvertently restrict consumer mortgage choices, and that does not impose burdens that are unnecessary to carry out the purposes of these new laws.
CFPB LIAISON, GUIDANCE, AND ASSISTANCE ON MORTGAGE RULES
The CFPB should place a priority on establishing a senior CFPB officer with responsibility for coordinating outreach and rules guidance to small- and mid-sized lenders – and back this up with adequate staff and resources to carry out the task. The largest banks and lenders have the economies of scale and resources to hire out expensive legal, and other outside professional services, to help in understanding complicated mortgage rules and how to comply with them. The CFPB should help level the playing field by providing guidance and assistance to smaller lenders with the challenges of complying with new rules.
TRANSPARENCY AND BRIGHT LINE STANDARDS
Mortgage rules and requirements should be fully transparent, and wherever possible, utilize bright line standards to make it easier for firms to comply with the intent and purpose of the laws. Failure to do this is bad for consumers, and it also gives an unfair competitive advantage to larger banks and lenders.
APPROPRIATE SAFE HARBORS AND EXEMPTIONS
Dodd-Frank gives CFPB, and other federal mortgage rule writers, authority to create exemptions and safe harbors, where appropriate, to carry out the purposes of the laws – by providing firms, especially small- and mid-sized lenders, ways to do this in a more streamlined fashion. These should be appropriately pursued.
Specifically, the CFPB has within its authority the ability to require all loan officers, including bank LO’s, to pass the UST . The current situation, in which non-bank LO’s must pass the test but bank LO’s do not, is a blatant act of favoritism to the big banks, and endangers American consumers by having them deal with bank LO’s who have exhibited no evidence of their qualifications.
REDUNDANCIES AND OVERLAPPING PROVISIONS
Congress should examine the range of mortgage rules to identify where there are redundancies and overlapping (and possibly conflicting) provisions. For example, do we really need four separate, and in many ways overlapping provisions limiting mortgage fees and compensation (RESPA/TILA, Loan Officer Compensation, HOEPA, and the QM 3% points and fees)?
MATERIALITY AND PROPORTIONALITY IN ASSESSING COMPLIANCE
The thousands of pages of recently adopted CFPB rules create an environment in which it may be relatively simple to run afoul of some minor or technical requirements, that aren’t important to the main purposes of the rules. This is particularly true for smaller mortgage lenders. Federal enforcement of mortgage rule compliance should use materiality and proportionately in assessing and enforcing violations of these rules.
[This material has been prepared by the Community Home Lenders Association (CHLA) for informational
purposes only, and may not be used for public use without the express written consent of CHLA]