Consumer Financial Protection Bureau (CFPB) Director Richard Cordray said loan originators face huge advantages under the agency’s mortgage rules that will take effect January, speaking today at the American Bankers Association’s annual conference in New Orleans.

In an effort to end many of the irresponsible lending practices that spurred the recent financial crisis, the CFPB issued its Ability-to-Repay rule—also known as the Qualified Mortgage or QM rule—earlier this year.
 
The rule aims to make sure consumers are getting mortgages they can actually afford to pay back.
 
In addition to the QM rule, CFPB also issued mortgage servicing rules designed to clean up many “sloppy and unsatisfactory practices” and to ensure fairer and more effective processes for troubled borrowers at risk of losing their homes.
 
Both rules were “desperately needed” by the financial industry, Cordray said, as they have paved the way for the agency to issue guidance on how to comply with them, while also helping to resolve ambiguities and unclear interpretations when the rules were proposed in January 2013. 
 
“For example, under the statute you would not have been permitted to charge any points or fees on any loan on which you paid compensation to any loan originator, regardless of whether that was your own employee or a mortgage broker,” Cordray said.
 
CFPB specified the effective date of its mortgage rules for January 2014, a year after proposing them, as there were a number of moving parts in the rules that prevented certainty in the mortgage market. 
 
“The central concept behind this project is our belief that compliance with regulations is a concern we all share, because successful compliance is good for everyone—consumers, industry, and regulators,” Cordray said. “We believe that working together makes the process go more smoothly, attains greater understanding, and helps achieve better results.”
 
As the financial market has grown more complex in the aftermath of the recession, the CFPB stressed the importance in placing a consistent and sustained emphasis on financial education so that financial institutions can lead through responsible business practices and consumers can make informed decisions.
 
“We believe that such a marketplace is the right outcome for all involved, and will lead to more stable and sustainable financial conditions that strengthen the future of this country,” Cordray said.

Written by Jason Oliva