Don’t blame the CFPB for tight credit

Julie C. Nichols General

Washington Post Blog – Lydia DePhillis

With the confirmation of Richard Cordray, the financial industry has stopped trying to destroy the young agency he runs, the Consumer Financial Protection Bureau. But that doesn’t mean it’s stopped complaining about what the Bureau is up to. In particular, banks and their advocates say that new rules requiring stricter lending standards are making it harder for everyone to get a mortgage, not just those who actually can’t afford to pay it back. Essentially, they charge, bureaucrats trying to protect consumers have in some ways done the opposite.

“There is absolutely no question that the qualified mortgage rule has tightened credit,” says David Stevens, president of the Mortgage Bankers Association of America. “It put a hard debt to income ratio that is much narrower than some underwriters would’ve allowed for some borrowers.” That’s true even though the rule doesn’t actually go into effect until January 2014, he says, since banks have started using its guidelines in preparation for the day when not doing so will be against the law. Then, there are worries about what might come down the pike from the CFPB or other regulators next, like the final qualified residential mortgage rule – QRM as opposed to QM — which will govern investment in mortgage-backed securities.

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