It is not going to be easy implementing
That is the message that attorneys, consultants, trade group officials and the bankers stressed with attendees at the American Bankers Association’s real estate conference in New Orleans.
“You need to know that the regulatory changes out there are here to stay, and the reality is you just have to come to terms with them and deal with it,” according to Mitch Kider, chairman and managing partner at Weiner Brodsky Sidman Kider PC.
He stressed that compliance must be a top priority. The regulators have no tolerance for noncompliance. “You got to sit down, take a deep breath and look at how things are done in your company and you have got to start the implementation process. Most of the mortgage rules kick in January 2014 and there is an awful lot that has to get done before then,” Kider said.
A lot of the discussion at the ABA conference centered on the
Dechert partner Thomas Vartanian tried to assure the bankers that they will be rewarded if they successfully implement and comply with the Consumer Financial Protection Bureau’s QM rule.
“If it works, you will have a competitive benefit over the bank across the street,” the veteran attorney said. “If you make a QM loan, you got a better defense” if the borrower defaults and sues. And it will be a more valuable loan. “You can collect and foreclosure on the loan,” Vartanian said.
Several attorneys commented that the QM “safe harbor” that is supposed to shield lenders from litigation will be challenged and lenders have to be prepared to defend themselves. “The corporate record is going to be very important in terms of your defense against borrowers,” Vartanian said. The board of directors must document their efforts to comply with new rules.
It is a “sea change,” he stressed. “The changes are going to be robust, systems have to be robust and they have to show you are in compliance and doing what you are supposed to do.”
ABA executive vice president Bob Davis noted that community banks continue to offer a broad range of mortgage products, including adjustable-rate mortgages. Over a third (38%) of their loans provide financing for homebuyers.
Despite the onslaught of complex mortgage regulations, banks will adapt to the new regulatory regime. “They are not going to be driven out of the mortgage market by regulations,” Davis told NMN.
One consultant told the conference attendees that CFPB has taken a very reasonable approach to rulemaking—and part of that comes from the political tensions in Washington.
President Obama installed Richard Cordray as the first CFPB director via a recess appointment and Senate Republicans still won’t confirm Cordray or any director until Congress makes structural changes to bureau.
CFPB has “constraints on them that are good for the industry. It makes it all the more important that their actions are viewed as reasonable,” said Robert Broeksmit, managing director, Treliant Risk Advisors LLC
The QM rule is a “fairly reasonable rule,” he said, considering it is mandated by the Dodd-Frank Act. And the CFPB provided a safe harbor for QM loans, which was strongly opposed by consumer advocates.
CFPB officials “really understand that if they were to get this wrong,” it could stall the housing recovery, Broeksmit said.
Meanwhile, industry groups continue to press the CFPB to give banks and other mortgage lenders more time to comply with the QM rule and other mortgage rules mandated by the Dodd-Frank Act.
In a recent letter to the CFPB, three groups point out that the QM rule is slated to go into effect in January, but the bureau is still clarifying parts of the rule.
The American Bankers Association, Consumer Bankers Association and Financial Services Roundtable contend lenders need an additional six to 12 months to complete the implementation process. ♦
