The Consumer Financial Protection Bureau (CFPB) has revised its “ability-to-repay” rule to accommodate small creditors, community development lenders, and housing stabilization programs. Previously, the rule had eliminated much of the flexibility that allowed smaller lenders to operate locally and on a personal basis with their customers, effectively, these lenders warned, driving them out of the mortgage market. The CFPB amended the rule by allowing qualified lending entities to “make reasonable changes to the rule in order to foster access to responsible credit for consumers,” said CFPB director Richard Cordray[1]. Most new mortgages still must comply with qualified mortgage (QM) standards that prevent lenders from making high-risk loans.

Certain non-profit creditors and community-based lenders that help “low- and moderate-income consumers obtain affordable housing” will be exempt from the ability-to-repay rule, as will community banks and credit unions that have less than $2 billion in assets and make 500 or fewer first-lien mortgages[2]. This will allow small lenders to continue making balloon loans when they believe that the risk is appropriate, which is particularly important in rural and agricultural communities. Do you think that the CFPB’s QM rules are good ones? Are these exceptions and exemptions wise?




by Carol VanSickle