The Community Mortgage Lenders of America (CMLA) has drafted legislation that, if taken up by Congress, would exempt small lenders from having to comply with certain regulations imposed under the Dodd-Frank Act, providing they do not engage in predatory or abusive loan practices.
Under the Community Mortgage Lenders Act of 2013, small lenders would be exempt from the seven-day waiting period requirement; the three-day waiting period if terms improve for the consumer, new servicing rules targeting impersonal shops, auditing of third-party vendors, and Consumer Financial Protection Bureau (CFPB) examination authority (unless a referral comes from a state or federal regulator). What's more, they would be exempt from the additional capital requirements called upon by the voluntary global regulatory standard, Basel III.
The idea is to preserve the intent of the Dodd-Frank Act, as it applies to larger lenders, but give smaller lenders a break, as they were not the cause of the housing crisis that began in late 2007.
‘The Dodd-Frank Act created the CFPB and other regulatory controls to crack down on pernicious lending practices and to improve the transparency in lending markets,’ said Mark McDougald, chairman of the CMLA, in a statement. ‘But, small community bankers and lenders were not responsible for the mortgage crisis and should not face excessive regulatory oversight and additional cost burdens.
‘While we all agree that consumers deserve protection from abusive products and practices, we remain deeply concerned that a 'one size fits all' approach will significantly disadvantage small, community-based lenders that did not create the meltdown, and don't have the resources to hire an additional staff to comply with rules aimed at larger institutions,’ McDougald added.
Under the proposal, community lenders would receive relief from parts of current SAFE Act standards – for example, they would not be forced to pay for far-reaching and costly activities such as collecting non-consumer impacting data or conducting statistical analysis.
The proposal also seeks QM protection for a small lender's book of business for the purpose of improving underwriting flexibility.