Consumer Financial Protection Bureau Director Richard Cordray once again stood before an audience and slammed anyone who has claimed that the bureau’s regulations are killing banks.
He specifically highlighted the success of credit unions and community lenders as lenders who have benefitted from the bureau’s regulations.
And yet these same two groups spurred the following headlines on HousingWire:
- NAFCU to CFPB: Pull credit unions out from under your authority
- Community lenders: We should be exempt from CFPB exams and primary enforcement, too
Both statement can’t be true, so where is the disconnect?
It looks like a serious lack of communication since both of those are articles are based off thoughts from the top associations advocating for them.
This latest speech from Cordray at the Peoples and Places Conference in Virginia sheds light on a growing issue that credit unions and community lenders have consistently called on the CFPB to fix and that there is an extreme misunderstanding between the bureau and credit unions and community lenders.
During his speech at the conference, Cordray unfolded the inner workings of how and why the bureau operates.
Included in this explanation, Cordray said:
Some doomsayers sound a frequent refrain that new regulations are killing the banks and choking off access to credit. On the contrary, these common-sense rules of the road are promoting access to more responsible and safer credit. Banks have been consistently profitable and smaller institutions like community banks and credit unions have grown their share of the mortgage market in particular. Last year, U.S. financial institutions had total annual profits of $171.3 billion. Community bank profitability has also rebounded to pre-recession levels. In 2010, only about 78 percent of community banks were profitable. By the end of 2015, that number had jumped to over 95 percent. Credit has expanded in the markets for auto loans, as well, with the sales of cars and trucks reaching record levels in each of the past two years. These are encouraging developments for many consumers and for many lenders.
Then on the other side of the fence, as recent as April, National Association of Federally-Insured Credit Unions President and CEO Dan Berger wrote a letter to the Senate Banking Committee members to highlight the economic benefits that credit union regulatory relief would create, explaining the important role credit unions play in the economy and the urgency of granting them more flexibility.
Berger included in the letter that since the second quarter of 2010, credit unions lost more than 1,500 federally insured credit unions, which is more than 20% of the industry.
And for those saying this trend was already happening, the letter added that the passage of the Dodd-Frank Act accelerated the trend.
Scott Olson, executive director of the Community Home Lenders Association, vocalized similar concerns last year, stating, “Unfortunately, there is a growing recognition that the cost and compliance burden of a myriad of new mortgage rules is a major factor causing lender consolidation – with smaller lenders selling to larger lenders or exiting the mortgage business altogether. Consolidation of community lenders means less competition, fewer consumer choices, and higher mortgage rates and costs.”
Just because credit unions and community lenders are more profitable or growing their market share, it doesn’t directly mean that they aren’t being stifled by regulation since they are clearly shouting a different message.
The industry as a whole has improved since the financial crisis, and on top of this, the housing finance industry is heading into a major boom of homebuyers since Millennials are set to start moving into homeownership.
Improvement can happen even with regulations, but how much more could lenders grow if they weren’t walking on eggshells?