WASHINGTON (8/7/14)--New Consumer Financial Protection Bureau (CFPB) mortgage rules are reducing the number of mortgages from all banks but the biggest, says the latest survey from the Federal Reserve. As reported in HousingWire Wednesday, the Fed's quarterly survey polled large domestic and foreign banks about the effect of the rules.
The CFPB's new qualified mortgage rule went into effect Jan. 10. The rule describes certain minimum requirements for creditors to make ability-to-repay determinations but does not dictate that one follows any particular underwriting model.
According to the report, almost 20% of the 36 large American banks said approval rate of prime residential mortgages was lower than it would have been. A "substantial share" of other respondents reported the rules were lowering approval rates.
The article also cites a similar report from credit rating agency Dominion Bond Rating Services that found federal regulations, along with a general shift to purchase activities from refinancing, have resulted in historically low mortgage originations and organic servicing growth.
The Credit Union National Association expressed concerns with the rule when it was in the proposal stage last year. In a survey conducted by CUNA in October, almost 60% of credit unions that responded said the new rule was making them consider scaling back mortgage practices.
In another CUNA survey conducted in April, 17% of respondents said the new rule had reduced or limited the number of first-mortgage loans the credit union is making. Of all respondents, only 1% said the rule had a "minimal positive impact," and 31% said it had no impact.
The remaining credit unions said the rule had a strong negative impact (7%), moderate negative impact (27%) or minimal negative impact (34%) on the ability of credit union members to get approved for a first mortgage.
Credit unions have seen a 45% drop in first fixed-rate mortgages issued in the first quarter this year after three straight years of growth. From January to March 2011, 89,037 first fixed-rate mortgages were granted, and that number rose to 134,016 during those months in 2012 and 154,185 in 2013. From January to March 2014, only 69,958 were issued.
CUNA also notes that this decrease could be due to a number of factors, including increasing real estate prices.
Balloon and adjustable-rate first mortgages saw an increase from 2013 to 2014 that was on par with previous year-to-year gains. In addition, fixed- and adjustable-rate second mortgages saw growth within normal ranges from year-to-year since 2011.