During his speech to the American Bankers Association Annual Convention earlier this week, Consumer Financial Protection Bureau (“CFPB”) Director Richard Cordray confirmed the January 2014 effective date for the new mortgage rules promulgated by the CFPB. Director Cordray justified this effective date by saying that most of Title XIV of the Dodd-Frank Act would have taken effect in its own right in January 2013 had the CFPB not put the new rules into place.
In attempting to temper the CFPB’s unwillingness to push back implementation of the new mortgage rules, Director Cordray said that the CFPB would keep in mind the substantial learning and compliance curve faced by financial institutions. He said that the CFPB’s “oversight of the new mortgage rules in the early months will be sensitive to the progress made by institutions that have been squarely focused on making good-faith efforts to come into substantial compliance on time – a point that we have also been discussing with our fellow regulators.” Although the CFPB may state that it will be “sensitive” to progress, it is unlikely that plaintiffs’ attorneys will keep this learning curve in mind when the new mortgage rules take effect in January.
Although the CFPB is clearly touting the January 2014 compliance deadline, Representative Shelley Moore Capito of West Virginia, House Financial Services Financial Institutions Subcommittee Chairman has circulated a letter that asks Director Cordray and the CFPB to reconsider pushing back the deadline. The letter highlights the compliance burdens of smaller financial institutions: “[Compliance by January 2014] is especially difficult for community financial institutions that may only have one or two compliance officers… [W]e urge you to defer implementation of these rules until January 1, 2015 in order to ensure financial institutions are able to transition their systems to be in full compliance with the rules.”
During a recent speech at Executive Resource: Symposium for WV Community Banks, held in Charleston, West Virginia, by Spilman Thomas & Battle, Representative Capito reiterated the same. She said the regulations were designed for the larger financial institutions that were the cause of the financial crisis; the vast majority of local community banks run their businesses in a responsible manner and don’t involve themselves in the more risky investment strategies of larger institutions. She encouraged community banks to speak up before the change goes into effect.
As the CFPB continues to promulgate rules and the compliance burden becomes even greater, the proposed extension would certainly be a great relief for many institutions. Pending any delay, institutions need to work to be compliant by January 2014, and they should contact Spilman or other knowledgeable counsel with questions.