Richard Cordray, director of the Consumer Financial Protection Bureau, refuted claims that new mortgage rules would significantly raise the cost of issuing mortgages and decrease credit availability, as many lenders have feared, National Mortgage News reported June 19.
In a speech at the Exchequer Club in Washington, D.C., Cordray said that the ability-to-repay rule and the creation of “qualified mortgages” would not hamper the industry even though banks have claimed lenders won’t want to make loans that don’t fit the QM rule.
“I think there has been more hubbub around these requirements than is perhaps justified,” Cordray said, National Mortgage News reported. He said that lender fears are “vague,” adding that the average cost for a non-QM loan is estimated to be less than 10 basis points higher than a qualified mortgage.
Cordray also said the idea that a significant portion of the current market would not be defined as qualified mortgages was incorrect. He reiterated figures from Mark Zandi, chief economist with Moody’s Analytics, who said that around $20 billion of the $1.25 trillion mortgage market would fall outside the QM definition. He noted that the QM rule would cover more than 98 percent of the current market.
However, Cordray conceded that the rule could cause a break in the secondary mortgage market but noted that it’s too early to say for certain, National Mortgage News reported.
During his talk, Cordray justified the CFPB’s extensive data gathering on the mortgage market over the last decade, noting, "Someone, someday will be in my position five to 10 years down the road and they'll be more surefooted about policy decisions that we've had to make based on the mortgage data,” National Mortgage News reported.
Cordray defended his position as sole director of the CFPB given that many Republicans have been arguing for a commission instead of a directorship. He said the sole directorship structure gives the agency “nimbleness in going forward and moving the agency,” National Mortgage News reported.
In addition, Cordray addressed disparate impact, which occurs when a lender engages in unintentional discrimination because a rule or standard leads a certain class of lenders to suffer adverse impacts. Banks have argued that the QM rule could lead to unintentional discrimination.
He said that lender concerns over disparate impact were overrated. “If you're doing solid, responsible lending and you’re mindful of the fact that there are fair-lending concerns around it, I don't know that you need to change what you've been doing,” Cordray said, National Mortgage News reported.