Skip to main content

CRA Impact May Not Be As Profound As Feared

Keith Griffin
May 17, 2022
Rohit Chopra speaks at MBA Conference
CFPB Director Rohit Chopra, right, speaks with Robert D. Broeksmit, MBA president
National Mortgage Professional

CFPB Director Rohit Chopra tells MBA conference changes shouldn’t be difficult

By KEITH GRIFFIN, Senior Editor, National Mortgage Professional

The impact of revised Community Reinvestment Act regulations may not be as pronounced as some mortgage bankers fear. That was the basic theme of remarks delivered by the head of the Consumer Financial Protection Bureau at a Mortgage Bankers Association conference in Times Square.

During a discussion at the Mortgage Banker Association’s Secondary & Capital Markets Conference, Rohit Chopra, the CFPB’s director, said, “I’m not seeing this as something that would be difficult for the vast majority of the industry.”

The Mortgage Bankers Association has come out against expansion of the Community Reinvestment Act, which requires traditional banks to reinvest deposit funds in all communities they serve. The MBA categorizes the proposed expansion as a “solution in search of a problem.” The trade group says the proposal puts independent mortgage bankers at a disadvantage because they don’t have deposits to reinvest and would not have access to direct government support.

Chopra said the CRA is “a place where we would be able to prompt outside of the banking sector ways people are fully serving their communities and many of them are doing it anyways. Some of [the independent mortgage bankers] have performance where it would be so easy to meet. At the same time, we are certainly looking at red lining work to make sure we are not just looking at banks, but nonbanks as well.”

He added, “I would think there are a lot of public benefits to it. Certainly, while they don’t take deposits, there are ways in which independent mortgage banks interface with the public safety net. We need to think about that. I don’t think there is something we should do immediately, but I don’t think we should try to put a stop to these state laws.”

There have been efforts by some state legislatures to enact CRA-style laws. New York earlier this year expanded its CRA laws to cover banks. Illinois and Massachusetts already apply CRA-type laws to non-depository mortgage lenders.

MBA president Bob Broeksmit indicated there is still much to be hashed out on the issue. “This is a ‘to be continued conversation,” he said at the conclusion of the discussion between the two.

Chopra said there have been no changes to the CRA since the 1990s. Adaptions need to be made to keep pace with technology and innovations like mobile banking. The changes, he added, are not just focused on mortgages but small-business lending as well.

He said as banks moved away from FHA loans, non-bank mortgage providers moved in. “My hope is CRA drives more activity in some of the historically disadvantaged communities,” adding that the changes would benefit both urban and rural areas.

“I don’t see CRA as a big driver of whether banks get back to FHA lending. I don’t know if that should be a rule in and of itself. We just want to make sure there are a lot of offers of mortgage credit to all communities and all individuals that qualify for it,” Chopra said.

The CFPB director also challenged the mortgage bankers to look beyond the CRA issue. “I really want the mortgage industry thinking hard about consumer financing infrastructure. That’s really where we have to put a lot of energy. What do we see as the future of the credit reporting industry and frankly credit scoring? We see functionally a monopoly in FICO that is the bulk of credit scoring today.”

There are also technology changes coming that could open the lending process more for consumers. “We don’t just need to think of block chain technologies but real time payments and the future of how consumers are going to interact with their data as well. We are thinking hard about a rule making that is a latent authority that is going to move consumer finance forward to an open finance system slowly where consumers may have full access to their data and be able to share that data for the purposes of underwriting. You can imagine that data might be quite useful in getting more accurate underwriting.”

Another area the CFPB will focus on is digital assets. “We want to very closely watch digital assets, including crypto assets, how they’re going to play in the financial systems. It’s obviously going to touch mortgage lending in some way. Being prepared for all of that is key,” Chopra said.

Published
May 17, 2022
L.A.-Area Broker To Serve Time For Defrauding Lenders

Alex Ashod Dadourian convicted on 91 counts for $8 million in mortgage fraud.

Regulation and Compliance
Dec 08, 2022
Ginnie Mae Has Doubled The Proportion Of VA Loans In Its Portfolio

In report to Congress, agency says VA loans have risen to 45% of its MBS portfolio over 10 years.

Regulation and Compliance
Dec 08, 2022
Fannie Mae Updates Underwriting To Help 'Credit Invisible' Borrowers

Enhancement to Desktop Underwriter system intended to support loans when borrower has no credit score.

Regulation and Compliance
Dec 06, 2022
MBA Offers Suggestions For Improving Refis, Forbearance

Responds to CFPB's request for information published in September.

Regulation and Compliance
Nov 30, 2022
2023 Conforming Loan Limit Tops $1M For High-Cost Areas

FHFA said the baseline conforming loan limit will increase 12% next year.

Regulation and Compliance
Nov 29, 2022
FHA Extends Waivers To Its HECM Loss-Mitigation Policies 

Extension applies to senior borrowers affected by COVID-19.

Regulation and Compliance
Nov 28, 2022