Federal, News, Oversight, Regulation

HFSC examines impact of Dodd-Frank rules on homeownership

170px-Seal_of_the_United_States_House_of_Representatives.svgDuring a Tuesday hearing on the Dodd-Frank’s impact on homeownership, Rep. Shelly Moore Capito (R-W.Va.) said the CFPB’s ability-to-repay/qualified mortgage rule may unintentionally hurt consumers.

Capito, the chairman of the House Financial Services subcommittee on financial institutions and consumer credit, said low-income consumers and consumers in rural areas with low property values may see mortgage lenders’  ability to engage in “relationship lending” suffer as a result of the legislation.

“Mortgage lending can be highly subjective business, especially in rural and underserved areas,” Capito said in opening remarks. “This element of relationship based decision making is completely ignored by the premise of the rule. It will be nearly impossible for the CFPB to endlessly amend the rule to accommodate the ability of lenders to make these relationship based loans. Unfortunately, the end result will be some consumers losing access to credit and the ability to own their own home.”

James Gardill, the chairman of West Virginia-based WesBanco, said the CFPB’s rules threaten the bank’s charitable program that helps large families buy home.

“We currently have approximately 100 active loans under this program, providing homes to families who otherwise would not be able to afford one,” Gardill said. “We are concerned that, under the new rules, loans like these will not qualify for QM status, and as a result it will be very difficult to continue this program that has given so much back to the community. Of even greater concern is the fact that some borrowers served by this program would not meet the Ability to Repay standards and thus could not be helped by this or any other bank program going forward,” Gardill said.

Jerry Reed, the chief lending officer at Alaska USA Federal Credit Union, said the QM rule’s “bureaucratic standard” will hinder homeownership.

“Congress and the regulators should encourage financial institutions to offer loan products focused more on the individual,” Reed said. “Unfortunately, depending upon how the QM rule is interpreted by the prudential regulators and how it is utilized within the marketplace, the QM rule may stop this from happening.”

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