CFPB Director Richard Cordray spoke to the National Association of Realtors on Tuesday on the efforts the agency has put forth to help the housing market recover from the financial crisis.
“The aftermath of the financial crisis has left a tremendous mess for us all to clean up,” Cordray said. “Today, as millions of Americans continue to struggle to pay their mortgages, millions more are waiting for the market to get better before they consider buying a home. For many people, the problem is access to credit, which has become achingly tight…We know that you are dealing with these problems in your respective markets, and you will be for some time to come. And, we share your deep concern about the far-reaching effects on your profession and on your communities. The good news is that the Consumer Bureau was created to help prevent these kinds of problems from recurring in the future.”
Cordray said one of the “central tenets” of the agency’s mission is to ensure consumers have the knowledge required to choose the right products and services for themselves and their families, pointing to the AskCFPB tool and complaint database.
Additionally, Cordray spoke on the CFPB’s ability-to-repay, or “qualified mortgage” rule, which is designed to require lenders to determine whether a consumer can afford to pay back their debt obligations.
“Some of the worst abuses that occurred in the last decade, such as no-doc loans and so-called ‘NINJA’ loans – no income, no job, no assets, but you could still get a mortgage loan anyway – will now be prohibited when the rule takes effect in January,” Cordray said. “Irresponsible underwriting practices, like making loans based only on introductory teaser rates rather than the full cost over the life of the loan, are also banned. Had these provisions been in effect ten years ago, I believe the financial crisis would not have occurred with the same severity, and people would not have suffered as deeply as they did.”
Cordray said that while “no standard is perfect,” the qualified mortgage rule “provides real protection to borrowers and greater certainty to the mortgage market.”
“Those lenders that have long upheld strong underwriting standards have little to fear from the Ability-to-Repay rule,” Cordray said. “These lenders, including many of our community banks and credit unions, have seen the strong performance of their loans over time. Nothing about their traditional lending model has changed, and they should continue to offer such mortgages to borrowers whom they evaluate as posing reasonable credit risk – whether or not they meet the criteria to be classified as Qualified Mortgages. We all benefit by recognizing and sustaining responsible lending wherever we find it in the mortgage market – realtors most of all.”