We'll take that. Thank you very much.

6/5/2013 - By Kristen Stogniew, Esq., AAP

Last week, the Consumer Financial Protection Bureau published final rules that acknowledge the critical role that community banks and credit unions play in our economy through financing home loans.

We really should all be grateful.

In a move that American Banker magazine called a "Home Run," the Bureau crafted a few key exemptions to the Dodd-Frank Act's "ability-to-pay" rules that will become effective in January 2014. The rules as proposed would have opened community banks and credit unions up considerably to regulatory and legal attack on their portfolio loans, which, by definition, consists primarily of non-conforming, balloon mortgages, or loans that are higher-priced than those typically found in the residential secondary market. In response to the perceived regulatory burden (and, much to our chagrin, since we make it a priority to explain and document compliance requirements so they can be understood and applied on a day-to-day basis), many smaller institutions seriously considered getting out of residential mortgage lending, if they haven't already done so. That would be a shame for our communities and for those of us who don't fit "inside the box" of securitized financing.

The rule's final exemptions let the air out of the pressure cooker, and I hope the affected institution (under $2 billion in assets who originate less than 500 1st mortgage loans annually) understand that this is a competitive advantage....which is a very nice thing in this current environment.

Unfortunately, this hard-won award is not a cure-all for the regulatory burdens affecting residential lending. There are many regulatory changes coming next January thanks to the Dodd Frank Act. Truthfully, none are complex or deal-breakers, but their sheer numbers will present a challenge for residential lenders of all sizes to implement. In breaking them down, all can be managed by one or more common processes: (1) core or loan document system updates; (2) policy and procedure revisions and associated staff training; and (3) internal audit and monitoring program updates to periodically check under the hood.

A couple examples of the more onerous changes....ARMs (adjustable rate mortgage loans) will require significantly more advance notice of interest rate changes, and tellers and other employees who refer prospective home loan applicants for even a token referral fee (i.e., $25) will be considered "loan originators" for purposes of compensation and qualification requirements.

We will be providing support through these times to financial institutions via one-on-one and group workshops, so stay tuned. In the meantime, take a second to say "Thank You", then continue on the course (and, you may want to refer back to my prior "Inspirations" blog ... I'm just sayin').