By Julian Hattem - 11/07/13 10:16 AM EST
New restrictions on mortgage lenders require nothing more than what financial institutions should already be doing, according to the country’s top consumer finance watchdog.
The Consumer Financial Protection Bureau (CFPB) regulation, known as the "ability-to-repay" rule, sets standards for lenders to make sure that borrowers are able to pay back the mortgages they take out.
“However in the mortgage market, running up to the crisis, it was not at all the norm.”
Some members of Congress and financial organizations have opposed the rule, which they say is coming on too quickly for many financial institutions.
This week, a bipartisan group of House lawmakers wrote a letter to Cordray, saying that the rules “will fundamentally change our nation’s mortgage market.”
“We have heard concerns from many community financial institutions that they simply will not be able to meet the January 2014 deadline to have their systems on line and in place,” they wrote. That could lead to “significant distortions in the mortgage market,” which would hurt consumers.
Cordray on Thursday noted that the rule has long been in the works. Plus, he added, regulators will only be looking for institutions to how “good faith efforts” to comply with the standards when they first go into effect.
“I think that some of the concerns have been significantly overblown,” he said.
He added that the process of writing the rule actually gave financial institutions an extra year to comply with it, which is on top of the two and a half years they had since the Dodd-Frank Act was passed. The 2010 financial reform law originally called for the regulation.
All that means “that industry has actually had more time than they originally anticipated,” Cordray said.
Once the rule takes effect next year, the American financial market will be safer and more sound than it was before, Cordray said.
“There’s no question that the mortgage market will be safer and function better with our new rules that take effect Jan 10,” he said.