AFR in the News: CFPB Readies New Mortgage Rules as Banks Seek More Time

With the Bureau about to issue new mortgage underwriting rules, major banks have asked for another year to comply, according to Carter Dougherty of Bloomberg News.

The rules, Dougherty says, are “likely to resemble” an October draft that “imposed a range of underwriting requirements and extended a legal safe harbor to loans issued at prime interest rates to borrowers whose total debt-to-income ratio doesn’t exceed 43 percent.”

While the banks are asking for more time, financial reformers object to the safe harbor idea, which would make it impossible to take a lender to court.

The CFPB will also soon issue rules for mortgage servicers. “Consumer groups have continued to press CFPB for rules on mortgage servicing that would restrict so-called dual tracking, the process of seeking mortgage modification during foreclosure,” the Bloomberg article reports. “They are also seeking substantive obligations on lenders to modify some mortgages beyond those CFPB has proposed.”

In a meeting with CFPB director Richard Cordray, AFR and its allies argued “for more stringent rules on mortgage modification,” according to the article. “They also assembled a group of law professors who argued in a meeting that it has the authority to do so…”

Consumer and housing groups see the servicing rules as crucially important. “They have to be bold on this one to get it right,” AFR executive director Lisa Donner, told Bloomberg.