Condo Media - July 2013 - 10

N e w s
C A I

CFPB Faces Bipartisan
Criticism over Mortgage Rule

O

n Tuesday, May 21, members of a key U.S. House
of Representatives subcommittee took the Consumer
Financial Protection Bureau (CFPB)
to task over the Bureau’s new mortgage lending standards. In what may
be the fledgling CFPB’s first taste of
bipartisan criticism, lawmakers from both political parties expressed concern over
several aspects of the Bureau’s
signature mortgage lending regulation, the qualified
mortgage (QM) rule.
“CAI strongly supports the QM rule’s basic
requirement that lenders
verify a borrower can repay
a mortgage before making
the loan,” says Thomas M.
Skiba, CAI’s chief executive
officer. The QM regulation
affects every aspect of the
mortgage lending process
and includes a new consumer safeguard mandating that
lenders document borrowers
have the ability to repay a mortgage
before extending credit.
Lenders violating QM standards face
significant penalties under the federal
Truth in Lending Act. The legal and
regulatory risks of originating nonQM loans have led many lenders to
warn that only mortgages meeting
QM standards will be available to consumers beginning in 2014.
“CAI has always been concerned
that the unique structure of community associations could lead to
some unintended consequences,” says
Skiba. “CAI is committed to finding
and addressing any aspect of these
new mortgage regulations that hurt
our homeowners simply because they

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Condo Media • July 2013

have chosen to live in a community
association.”
Unintended consequences were
clearly on the minds of lawmakers
who questioned CFPB officials on an
obscure portion of the QM regulation that limits lender fees. Under
the Dodd Frank Act, lender points

and fees may not exceed 3 percent
of the mortgage balance. The CFPB
has taken a broad view of charges
that are a part of the points and
fees limitation and CAI believes this
approach could hurt condominium
owners.
The CFPB has ruled that Loan Level
Price Adjustments (LLPAs), special
charges imposed by mortgage finance
giants Fannie Mae and Freddie Mac,
must be factored into the 3 percent
points and fees limitation for QMs.
Fannie Mae and Freddie Mac assess
lenders LLPAs for each condominium
unit mortgage the companies purchase. As a matter of routine, lenders
pass the cost of LLPAs directly to

borrowers. Including Fannie Mae and
Freddie Mac condominium LLPAs
in the points and fees limitation may
mean that condominium mortgages
will artificially violate the QM standard
and deny creditworthy condominium
owners and purchasers access to mortgage credit.
“Capping abusive finance
charges on mortgages is common
sense, but the Bureau should take
another look at including LLPAs
in the points and fees cap on QMs
for condominiums,” says Dawn
Bauman, CAI’s senior vice president for government and public
affairs. Lawmakers seem to agree
and pressed the Bureau during
the hearing to change how the 3
percent points and fees limitation
is calculated.
“Fortunately several members
of Congress agree the Bureau has
gone too far and legislation has
been introduced in the House
of Representatives to exempt
LLPAs from the points and fees
cap,” Bauman says. H.R. 1077,
the “Consumer Mortgage Choice
Act,” amends the Dodd Frank Act to
exclude LLPAs charged by Fannie Mae
and Freddie Mac from the 3 percent
points and fees limitation.
H.R. 1077, which is sponsored by
Michigan Representative Bill Huizenga, has drawn 34 co-sponsors that
include both Republicans and Democrats. This bipartisan support makes
the legislation a good candidate for
consideration by the House Financial
Services Committee later this year.
Committee Chairman Jeb Hensarling
of Texas has indicated that the committee will take up legislation to adjust
some aspects of the Dodd Frank Act in
2013. CM
Condo Media - July 2013

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