The mortgage regulation burden for small creditors lightened quite a bit after the Consumer Financial Protection Bureau announced changes to its mortgage rules to expand access to credit to small creditors in earlier Sepetember.
A big change in the new CFPB rules is the definition of a “small creditor”:
The loan origination limit for small-creditor status will be raised from 500 first-lien mortgage loans to 2,000 and will exclude loans held in portfolio by the creditor and its affiliates.
Steve VanSickler, chief credit officer of Silver State Schools Credit Union, one of the credit unions impacted by the changes, explained that the new laws help significantly with the burden of proof in a courtroom.
“What we have been trying to do is avoid a legal battle. A Qualified Mortgage changes the burden of proof in the court of law. Since we were not doing QM loans, we took steps with disclosures,” VanSickler.
Before the change, VanSickler said his big concern is that when the law firms get tired of chasing shorts sales and charging fees and hurting consumers, they will switch their attack to whether borrowers got a QM loan or not.
Fearing future lawsuits, VanSickler said that they we were trying to protect themselves.
“Being a small creditor, the biggest piece for us was getting that safe harbor and rebuttable presumption,” VanSickler.
This is no longer the case for them.
Silver State Schools Credit Union benefited a lot from the change since it is based in Nevada, where 14 of 17 counties are rural.
Now with the finalized rule, VanSickler said, “It assists hundreds, if not thousands, of homeowners in these rural counties. [Small creditors] can make loans without fear of the non-QM loans.“
“We try to be as aggressive as possible in the market place. It is nice to know I have to be less concerned about doing non–QM loans. This is a big win for us,” he said.