This week CBAI submitted comment letters to the Consumer Financial Protection Bureau (CFPB) regarding proposed amendments to revise the definitions of “small creditor” and “rural” and “undeserved” areas which provide exemptions to the ability to repay (ATR) Qualified Mortgage (QM) underwriting requirements and escrow requirements for higher priced mortgage loans (HPML).
CBAI recommended that all community bank and thrift loans held in portfolio for the life of the loan, including balloon payment loans, in all geographic areas, should receive automatic QM status and an automatic exemption from escrow requirements for HPMLs. Community banks and thrifts that hold loans in their portfolio have 100% of the credit risk and have every incentive to ensure these loans are properly underwritten, well documented, affordable to the consumers, and properly serviced throughout the life of the loans.
If the CFPB chooses not to implement these recommendations, then CBAI supports (with qualifications) the proposed increase in the “small creditor” exemption, supports the expanded definition of “rural” areas, and again calls on the Bureau to expand the definition of “underserved” areas to include economically challenged areas. Read First Comment Letter. Read Second Comment Letter.