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NAFCU: Lift the burden of CFPB’s QM rule on credit unions

WASHINGTON, DC (January 14, 2014) — Orion Federal Credit Union CEO Daniel Weickenand will testify today on behalf of the National Association of Federal Credit Unions (NAFCU) in front of a House Financial Services subcommittee on the impact of the Consumer Financial Protection Bureau’s (CFPB) ability-to-repay/qualified mortgage (QM) rule on the availability of credit. This rule, which recently went into effect, only adds to the growing compliance burden for credit unions.

Weickenand, whose credit union is based in Memphis, Tenn., is testifying before the Subcommittee on Financial Institutions and Consumer Credit. He will recommend ways to provide relief from the QM standard to ensure the continued flow of mortgage credit to Americans and help ease the growing regulatory compliance burdens for credit unions.

“Despite the fact that credit unions were not the cause of the financial crisis, they are still firmly within the regulatory reach of several provisions contained in the Dodd-Frank Act, including all rules promulgated by the CFPB,” says Weickenand. “The impact of this growing compliance burden is evident as the number of credit unions continues to decline, dropping by more than 900 institutions since 2009. As we are hearing from many of our credit union members, ‘enough is enough’ when it comes to the tidal wave of new regulations.”

Weickenand describes his concerns that the QM rule will “potentially reduce access to credit and hamper the ability of credit unions to continue to meet their members’ needs.” A recent survey of NAFCU members found that a majority of credit unions may cease or greatly reduce their offerings of non-QM loans. The credit unions that will offer such loans indicated that only a very small portion of the mortgage offerings will consist of non-QMs,” according to Weickenand.

Weickenand also explains the impact that additional risk and legal liability along with the liquidity concerns associated with non-QMs has had on his credit union specifically and the decision to cease offering non-QM loans at this time.

“I cannot tell you how difficult this decision has been. Orion takes great care in placing our members with the right mortgage product, and the QM standard will inevitably force us to turn many creditworthy borrowers away.”

Weickenand says that while the CFPB has sought input on the rules, there are significant statutory limits to what regulators can do to modify them. Any significant changes to the ability-to-repay rule must be mandated by Congress. Although credit unions understand the intention of the rule and the significance of hindering unscrupulous mortgage lenders from entering the marketplace, this rule is unnecessarily restrictive for credit unions.

Weickenand recommends lawmakers do the following:

  • enact bipartisan legislation (H.R. 3211) introduced by Rep. Bill Huizenga, R-Mich., to alter the definition of “points and fees” prescribed by the QM standard;
  • modify the small creditor exemption;
  • exempt all mortgages held in portfolio from the QM rule;
  • consider mortgages of duration of 40 years or less as a QM;
  • revise aspects of the ‘ability-to-repay’ rule that dictates a consumer have a total debt-to-income (DTI) ratio that is less than or equal to 43 percent in order for that loan to be considered a QM;
  • provide that mortgages sellable to Fannie Mae and Freddie Mac be deemed to meet the Ability-to-Repay standards and receive safe-harbor protection; and
  • adopt the measures in NAFCU’s five-point plan for regulatory relief, including a provision that would authorize NCUA to delay implementation of CFPB rules that affect credit unions and to tailor those rules for credit unions’ unique structure.

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The National Association of Federal Credit Unions is the only national organization that focuses exclusively on federal issues affecting credit unions, representing its members before the federal government and the public. 

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