October 30, 2013

NAFCU urges CFPB, HUD to delay QM rules

Oct. 31, 2013 – NAFCU President and CEO Dan Berger on Wednesday urged CFPB Director Richard Cordray to delay the seven significant mortgage-related rules it has scheduled to go into effect in January 2014.

Berger, in a letter, wrote, "The rules directly affect or indirectly impact every aspect of a credit union's mortgage operations, including origination, servicing, loan originator compensation, escrow, insurance-related matters, and appraisals." Berger emphasized that the delay must be for at least 12 months so credit unions can prepare adequately without incurring unnecessary costs.

NAFCU Senior Regulatory Affairs Counsel Tessema Tefferi also wrote the Department of Housing and Urban Affairs Wednesday to request that it work with CFPB to delay the implementation of both agencies' proposed rules on qualified mortgages.

Tefferi praised HUD for proposing a rule in advance of the effective date of the CFPB's QM rule, as many FHA loans would otherwise not qualify for the CFPB's safe harbor treatment and would be treated as higher-priced mortgage loans. However, he urged the agency to work further with the CFPB to postpone the effective dates of both QM rules.

"As we have communicated with the CFPB, the complexity of the CFPB's QM rule in and of itself has caused significant compliance challenges and significant costs for credit unions," Tefferi wrote. "The challenges are compounded, however, by the fact that there are seven mortgage-related rules with which credit unions must comply by January, 2014. For credit unions, as non-profit cooperative entities that rely on retained earnings as their sole source for capital, delaying the effective dates of the rules is crucial."

Tefferi also responded to HUD's request for comment on whether its proposal should distinguish between safe harbor FHA loans and rebuttable presumption FHA loans: "NAFCU does not believe that it is either necessary or appropriate to make this distinction; all FHA-insured loans should be granted safe harbor protection." Tefferi explained that a two-tiered approach would increase compliance costs for credit unions unnecessarily.

However, Tefferi also proposed an alternative interpretation of the two-tiered approach – suggesting that HUD make a threshold determined by the combination of the maximum MIP (mortgage insurance premium) and the CFPB's annual percentage rate threshold (which requires the APR be no more than 150 basis points above the APOR, or average prime offer rate).

Tefferi also discussed how HUD's adoption of the CFPB QM definition of "points and fees" would undermine many credit unions' practice of pooling their resources to create Credit Union Service Organizations; the credit unions would be forced to offer their members services through more costly non-affiliates or to offer less flexibility for borrowers in using points to lower rates.