The Leniency Period Defense

At this point, rather than delaying the January 2014 effective dates, the Consumer Financial Protection Bureau has stated that there will be a period of sensitivity or leniency.  Per Director Cordray in a speech to the American Banker’s Association, leniency will be predicated on a bank’s “good faith efforts” to comply with the January effective dates:

…our oversight of the new mortgage rules in the early months will be sensitive to the progress made by institutions that have been squarely focused on making good-faith efforts to come into substantial compliance on time – a point that we have also been discussing with our fellow regulators.

So, five years down the road when your borrower cannot repay their mortgage loan and you’re standing before the judge, is the following going to fly?

“Your Honor in the bank’s defense, the mortgage loan in question made to Mr. and Mrs. Smith was made during the “leniency period”.  Therefore, the bank should be exalted of any errors made in relation to the Ability to Repay and Mortgage Servicing requirements of January 2014.

I don’t think so!

Jerod Moyer

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