Lenders Affected By New CFPB Rules

A litany of new mortgage rules has been issued this week by the Consumer Financial Protection Bureau.

The new rules update exam procedures for mortgages, including regulations that govern ability-to-repay standards and qualified mortgages. And it is not just credit unions that are trying to sort through the new requirements. The CFPB’s mortgage rules are complicated and likely will require small financial institutions to make major changes, says Rod Alba, vice president of mortgage finance and senior regulatory counsel at the American Bankers Association.

“Most of our lenders will have to recalculate risk,” Alba said. “The ABA has many educational activities [on the new rules] and we know our materials are getting downloaded at a very high rate.”

Still, the new rules could provide opportunities for some community lenders.

Orrstown Financial Services in Shippensburg, Pa., is looking to provide mortgage services to small banks that want limited exposure to the CFPB’s regulations, Jeffrey Seibert, the $1.2-billion-asset company’s COO, told American Banker, an affiliate of Credit Union Journal.

Residential loans make up 41% of Orrstown’s $660-million loan book, and management thinks it can shoulder some of the regulatory load for other banks. “Some community banks may [determine that mortgages are] not a line of business that is appropriate for them,” Seibert said.

Nonbank mortgage lenders also have set their sights on small banks as partners. However, lawyers, regulators and other bankers are unclear if community banks will be legally allowed to transfer any of their liabilities to nonbanks.