Small Lending Institutions Seek Relief From Some CFPB Mortgage Rules
Smaller financial institutions and community banks are petitioning the Consumer Financial Protection Bureau to allow them exemptions from two of the impending regulations on mortgage loans. The Independent Community Bankers of America has urged the CFPB to limit the scope of rules on mortgage disclosures, as well as the underwriting standards for home loans. The request has arisen from a concern about the costs of regulatory compliance. Community bank representatives are suggesting that a “tiered regulatory system” would ease their financial burden.
Although smaller banks, i.e. those with less than $10 billion in assets, are exempted from direct supervision from the CFPB, they are not exempt from CFPB regulations. The 2010 Dodd-Frank Bill does allow the CFPB to create exemptions for smaller banks in some circumstances, but does not require them.
The exemption request has drawn criticism from large banks and from some consumer groups who fear that lessening the intent of the regulations for any reason would lead to a repeat of the abuses that originally caused the housing market collapse. Alys Cohen, staff attorney for the National Consumer Law Center, said “Historically, two-tiered regulation has resulted in the migration of abuses to the lesser-regulated portions of the market.”
More information about this regulatory issue is available at Small Banks Seek Regulatory Exemptions.