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GAO: CUs Adjusted Well to CFPB Mortgage Rules
Wednesday, July 27, 2016 6:40 AM

Despite fears that increased compliance costs from new Consumer Financial Protection Bureau rules could drive community lenders out of the mortgage business, a watchdog report found that smaller companies remain active.

"Although new regulations related to mortgage lending and servicing may increase compliance costs for community banks, our analysis suggests that these lenders generally appear to be participating in residential mortgage lending much as they have in the past," said a Government Accountability Office report released Monday.

In interviews with community banks and credit union executives, the GAO auditors found these institutions increased staff, updated their data systems or hired vendors to assist with implementing the CFPB servicing and lending rules.

But there have been tough choices. Many increased fees and some stopped originating home equity lines of credit or offering bridge loans due to the compliance costs. One credit union that outsourced to a third-party servicer told GAO they were relieved because they can "still speak directly with their borrowers."

"Some representatives at community banks and credit unions we spoke with commented that CFPB’s exemptions for small servicers and creditors had been helpful to their businesses and customers,” the report says. “Several community lenders noted that CFPB’s small servicer exemption, which excludes from certain parts of CFPB’s mortgage servicing rules entities that service 5,000 or fewer mortgages, had been helpful in reducing some of their compliance requirements.”

The CFPB is slated to conduct a regulatory review of its new rules in 2018. But some the mortgage servicing rights (MSR) requirements won't be fully implemented until the end of 2018.

CFPB officials said it was too soon to identify relevant data and that they wanted flexibility to design an effective methodology. However, without a completed review plan, "CFPB risks not having time to perform an effective review before January 2019—the date by which CFPB must publish a report of its assessment," GAO said.