The Consumer Financial Protection Bureau launched its qualified mortgage and ability-to-repay provisions to mixed reviews Thursday.
The CFPB introduced the rule at midnight eastern standard time, drawing praise in some cases for including a safe-harbor provision for lower-risk loans and saving the rebuttable presumption standard for higher-risk mortgages. The rule (which is accessible here) would not take effect until Jan. 2014.
But credit unions and consumers groups, along with the Mortgage Bankers Association, still expressed some concern as they dug through the complex guidelines.
Fred Becker, CEO and president of the National Association of the Federal Credit Unions, said the association "appreciates the CFPB including the safe harbor provision." The provision only applies to certain low-risk mortgages.
Meanwhile, higher-risk loans come with a rebuttable presumption making ability-to-repay litigation still viable in specific, but narrow instances.
"Credit unions have been and continue to be responsible lenders who work to meet their members' needs with safe and sound products," Becker said.
"The safe harbor is preferable for all parties involved in a mortgage loan transaction as it provides clarity and certainty, and consequently discourages frivolous lawsuits, claims or defenses."
But Becker said the credit unions still worry about a "rigid approach to regulation."
"We are concerned that the rule could curtail lending by credit unions, and ultimately, negatively impact consumers by limiting the choices of prudent lenders in the mortgage market," he said.
The MBA also praised the safe-harbor rule that was included, but expressed concerns about compensation rules that could impact members in the lending industry.
"This is a very complex rule. We remain concerned that certain aspects of it could curb competition, increase costs and tighten credit availability for borrowers," said Debra Still, chairman of the MBA. "In particular, the 3% cap on points and fees appears to be overly inclusive as it relates to compensation and affiliates. Loans with the same interest rate, terms and out of pocket costs should be treated the same under the rule regardless of the organizational structure or business model of the lender."
The MBA is looking into "whether the interest rate threshold for the safe harbor, which is set at 150 basis points above the benchmark rate, will adversely impact too many borrowers."
The MBA's concern is pricing restrictions could keep consumers out of qualified mortgages, specifically smaller balance loans and jumbos.
But the MBA lauded the rule for at least getting standards in place to try to get the origination side of the market moving forward.
"If it also provides lenders the certainty needed to originate qualified mortgages broadly across the market to creditworthy borrowers, it will have been a success," Still wrote. "However, if the result is a tightening of credit as lenders pull back from offering loans that would create greater risk of litigation, the CFPB may need to quickly revisit the rule to avoid harming the housing recovery."
John Taylor, president and CEO of the National Community Reinvestment Coalition, said he never believed it was necessary for the rule to carry a safe harbor provision for lenders or even a rebuttable presumption. Instead, he believes the CFPB should have left all potential legal channels for consumers open while simply stating what the guidelines are for a safe loan.
Even though Taylor has suggested consumers should never be barred from presenting legal challenges in court, he is curious to see if lenders will now move forward offering more refinancing and home purchase opportunities to Americans with the safe harbor standard included on lower-risk loans.
"My position is okay you got what you wanted. Now lets see all this lending that you said you were going to do if you got this. There is no excuse any longer," Taylor added.