CFPB’s Fact vs. Fiction (or “I don’t know where you’re getting your facts”)

Recently, the CFPB released a memo entitled “Ability-to-Repay Facts vs. Fiction”.  Since reading it, I’ve Dave11contemplated picking up the phone and calling them.  This memo is an unethical shot at bankers, in my opinion.  Let me give you some examples:


 The Ability-to-Repay Rule does not require lenders to offer any specific type of mortgage.  Lenders can offer any mortgage they believe a consumer has the ability to repay, as long as they have documentation to back up their assessment.


 The Ability-to-Repay Rule is designed to protect consumers without disrupting the U.S. housing market.  Some of the nations largest banks have already said they plan on making loans that fall outside of the Qualified Mortgage guidelines.

While it may be true that “some . . . large banks” plan on making non-QM loans, most banks are not large banks.  Many smaller banks don’t have the legal expertise or systems these large banks have.  Some small banks are unwilling to take on the risks of non-QM loans or have stopped making real estate loans altogether.  These facts most certainly hurt the U.S. housing market, especially in rural areas without large banks.


The Ability-to-Repay Rule requires all mortgages to cap debt-to-income at 43 percent.

The CFPB is correct that you can make a loan above a 43% DTI, but the fact is many institution’s won’t.


 The new rules have excessive documentation requirements . . ..

The fact is there are more documentation requirements than ever before.


The Ability-to-Repay Rule does not cap all points and fees.  Loans that are not Qualified Mortgages have no restrictions on the total amount of points and fees.

This is true, but there ARE caps on fees (if you want to stay within the QM status).  The government is telling private businesses (your institution) how to price loans.  This is an infringement on free enterprise.


 Lenders haven’t had enough time to update their systems and get ready for the new rules.  The CFPB has amended the rules repeatedly, making it impossible for lenders to adapt in time.


The Ability-to-Repay Rule was finalized in January 2013, a full year before it was scheduled to take effect.

These statements bother me the most.  While it is a fact the rules were finalized in January 2013, the issuance of an excessive amount of technical amendments (and amendments to the amendments) caused software vendors to halt their system changes.  It is a fact that many of our clients inform us they are not ready with new loan software or just received systems updates without adequate time to implement and comprehend the systems changes.

Through these amendments, the CFPB has also revised many things (not just clarifying amendments) throughout the year.  In fact, they have issued over 1,000 pages of amendments.  The main reason for all of these amendments was a poorly written original regulation.  This is no different than when HUD issued the 2010 RESPA changes and then issued over 200 FAQs and the RESPA Round Up publications.

It is evident the CFPB is trying to rationalize their blunders by selling half-truths and misinformation through this memo.  They display a “victim mentality” pointing blame at bankers rather taking ownership and stating the true facts.  I understand they have to issue regulations that comply with the requirements of the Dodd-Frank Act; however, if they would have written a clear regulation in January 2013, they would not have had to write so many amendments.  Sadly, we are actually hoping for more amendments, as many things are still unclear.

At Banker’s Compliance Consulting, we are partnering with you in facing reality and deciphering the TRUE facts from the fiction.

David Dickinson

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