Year-old mortgage regulations from the Consumer Financial Protection Bureau are hurting banks’ mortgage lending business, according to a survey by the Independent Community Bankers of America, which represents 6,500 banks.
At issue is the CFPB’s qualified mortgage rule, which requires lenders to assess a borrower’s ability to repay and forbids features such as interest-only payments and negative amortization.
ICBA’s survey found that 86 percent of the 519 respondents offer mortgage loans. Of that percentage, 9 percent are considering exiting that line of business, while 6 percent already have.
More than half of banks, 57 percent, reported tighter underwriting standards for residential mortgages, while 44 percent reported a drop in originations.
A quarter of banks said they make loans that fall outside of the qualified mortgage rule, but most see it as too risky, which ICBA said shows that the regulations have taken away lender discretion.
There are exemptions to the qualified mortgage rule for small and rural lenders, but ICBA says they are too narrow.
ICBA has lobbied Congress to exempt all banks with assets of $50 billion or less from CFPB enforcement and examination.
It also wants lawmakers to remove the qualified mortgage conditions from loans held in portfolio. Banks argue that they have a direct stake in the performance of those loans.
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