HOME LENDER GROUPS ENCOURAGE CFPB TO TIER REGULATION BY SIZE AND CONSUMER RISK
CHLA Asks Bureau to Ensure Bank Loan Officers Meet SAFE Act Competency Test
WASHINGTON – Members of the nation’s leading trade groups representing community
mortgage lenders urged the Consumer Financial Protection Bureau (CFPB) to recognize the high
value – but low consumer risk – they bring to the marketplace and regulate them accordingly.
In high-level discussions with CFPB Director Kathy Kraninger and other senior leaders of
the bureau, representatives of the Community Home Lenders Association (CHLA) and Community
Mortgage Lenders of America (CMLA) explained how the costs of regulation disproportionately
fall on small lenders.
“Preparing for CFPB examinations adds hundreds of thousands of dollars in costs to a
small lender,” said CHLA President Don Calcaterra, Jr., of Local Lending Group in Roseville, Mich.
“One of our members incurs an additional $500,000 annually that translates to $100 per loan. It
is a high burden for small lenders that are also examined by states, other government agencies,
and warehouse lenders. The expense raises borrower costs and creates a barrier to entry which
decreases competition in mortgage lending,” added Calcaterra.
Attendees were appreciative of Director Kraninger’s commitment to include stringent
cost-benefit analysis when considering regulatory action, with an emphasis on recognizing the
impacts on small businesses.
In addition to so-called “tiered regulation,” the groups held discussions with Bureau
officials on mortgage loan originator compensation (MLO Comp), the loophole that enables bank
employed loan originators to avoid passing an exam testing their knowledge of mortgage laws
and regulations, and revisions to the qualified mortgage (QM) regulations.
Lenders encouraged CFPB to add the issue of MLO Comp to its Fall 2019 agenda of
regulatory issues to consider, arguing that both originators and consumers would benefit from
greater clarity in how loan officers are compensated.
They also said that the lack of uniformity in regulations between loan officers employed by
mortgage banks and depository institutions is a risk to borrowers. Mortgage bankers are required
to pass an exam demonstrating their awareness of consumer-protection laws in order to originate
loans. Loan officers employed by banks do not.
“Director Kraninger’s awareness of our concerns and her eagerness to learn about our
experiences as regulated lenders was refreshing,” said Calcaterra. “We look forward to further
discussions with her and her staff in the coming months.