Washington, D.C. – The Conference of State Bank Supervisors (CSBS), the American Association of Residential Mortgage Regulators (AARMR) and the American Council of State Savings Supervisors (ACSSS) submitted a joint comment letter Monday to the Consumer Financial Protection Bureau (CFPB) expressing strong support of a proposed small creditor amendment to the agency’s Ability to Repay rule.
The joint comment letter endorses the CFPB’s small creditor qualified mortgage (QM) definition and backs the increased average prime offer rate for the small creditor QM, which recognizes the increased costs of doing business for small creditors.
“CSBS, AARMR and ACSSS have long standing policy that regulations should not hinder an insured depository institution’s willingness to engage in portfolio lending, and this proposed rule would make it easier for such institutions to extend credit and retain the risk thereof,” the organizations wrote.
The organizations said the CFPB’s proposal properly summarizes the small creditor’s aligned interest with consumer protection and recognizes the strong incentives small creditors have to carefully consider a potential borrower’s ability to repay a portfolio loan because the creditor retains the risk of default.
The organizations also support the increased average prime offer rate thresholds for small creditors that, as proposed, would provide added room for increased legal protection conferred by the qualified mortgage definition. “As noted in the proposal, many small creditors are the predominant source of credit in areas where large creditors do not operate. Small creditors fill this gap with a business model crucial to our nation’s economy,” the organizations wrote.
While largely supportive of the proposed small creditor amendment, CSBS, AARMR and ACSSS also asked the CFPB to provide more clarity in the proposal regarding what constitutes an originated loan, and suggested the agency revisit the proposed thresholds in the future for evaluation of market trends.
The joint comment letter is available here. The CFPB’s concurrent proposal to the Ability to Repay Rule is available here.