In response to Dodd-Frank reforms passed by the CFPB, the National Association of Federal Credit Unions recently sent a letter to the regulator explaining its disagreement with the final ability-to-repay mortgage rule.
The final rule will require creditors to determine whether borrowers can meet their financial obligations, and while the rule does include a safe harbor provision that protects creditors from lawsuits, NAFCU said that the standards are not adequately outlined, Housing Wire reports.
The trade group urged the CFPB to reconsider the safe harbor’s debt-to-income and portfolio requirements, as well as the definition of a “small creditor.” The CFPB said in the current rule proposal that small creditors may have a better ability to assess a borrower’s ability to repay because of their customer relationship-based business model.
NAFCU said that it wants the CFPB to issue clarification that all covered transactions originated by a federally insured credit union would be deemed compliant with the final ability-to-repay rule, which allows an exemption for community development financial institutions, according to Housing Wire.
NAFCU also said that it would like the exemption to include low-income credit unions and credit unions that operate in underserved areas, both of which are already held to the standards of the National Credit Union Association.
Additionally, NAFCU said that the CFPB’s approach does not account for differences among institutions, adding that the proposal is counterproductive. NAFCU requested that the final rule, which is set to take effect next January, be tailored to the notion that each credit union adjusts to the market it serves, Housing Wire reports.