WASHINGTON (5/16/13)--Credit unions should continue to feel free to write non-qualified mortgage loans, as long as those loans are supported by strong underwriting, Consumer Financial Protection Bureau Director Richard Cordray said this week.
Cordray made his remarks before a National Association of Realtors gathering. In his remarks, Cordray said "lenders that have long upheld strong underwriting standards have little to fear" from the CFPB's ability to repay regulations.
The CFPB issued standards to define a "qualified mortgage" under the agency's "ability to repay" rules in January. The rule amended Regulation Z, which implements the Truth in Lending Act, to require creditors to make a reasonable, good faith determination of a consumer's ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan). It also establishes certain protections from liability under this requirement for "qualified mortgages."
"These qualified mortgages cover the vast majority of loans made in today's market, but they are by no means all of the mortgage market. This point is quite important, and it should not be misunderstood," Cordray said this week.
Credit unions and other community financial institutions "have seen the strong performance of their loans over time," he added. "Nothing about the traditional lending model has changed, and they should continue to offer such mortgages to borrowers whom they evaluate as posing reasonable credit risk--whether or not they meet the criteria to be classified as qualified mortgages. We all benefit by recognizing and sustaining responsible lending wherever we find it in the mortgage market," Cordray said.
For the CFPB Director's full remarks, use the resource link.