Democrats Join Bid to Provide Safe Harbor For Mortgage Brokers

The Consumer Financial Protection Bureau proved today it can engage in some fairly strong enforcement. Lawmakers in both parties want CFPB to ensure that individual homeowners cannot do the same thing.
At issue are CFPB rules on mortgages, the first of many that will set new standards in the industry. A group of House Republicans and Democrats, 108 strong, have expressed in a letter that the new rules on “qualified residential mortgages,” among the first on the industry for CFPB, include a “safe harbor” provision that would shield mortgage brokers and originators from borrower lawsuits. If expressed broadly, this would give borrowers no legal recourse on new loans to contest the terms of their mortgages.
The qualified residential mortgage provision, from the Dodd-Frank law, forces banks that issue mortgage-backed securities to retain at least 5% of the value of the portfolio on their own books. Loans issued with large down payments and favorable terms would be exempt from the QRM provision, giving an incentive to banks to issue plain vanilla loans, where they would not have to retain any risk.
CFPB will get a crack at defining what constitutes a qualified residential mortgage. And these bipartisan lawmakers want to graft on this safe harbor provision. Brad Sherman is leading this effort for Democrats:
“We want better loans, not bigger lawsuits,” said California Rep. Brad Sherman , a member of the Financial Services Committee who teamed up with West Virginia Republican Rep. Shelley Moore Capito to marshal support for a letter that was sent to the consumer bureau earlier this week. The letter was signed by 16 Democrats and 92 Republicans […]

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