In response to the Consumer Financial Protection Bureau’s (CFPB) Request for Information (RFI) regarding mortgage refinances and forbearances, the Credit Union National Association (CUNA) noted small loan refinancing challenges.
“Credit unions exist only to serve their members, and the relationship between credit unions and their members is fundamentally stronger than the relationship other financial services companies have with their customers,” the CUNA wrote in correspondence to the CFPB.
“However, credit unions have reported that when it comes to helping their members seeking to obtain or refinance smaller balance loans, there are several significant barriers that they face, many of which were enumerated by the Bureau in its RFI.”
The CUNA indicated the challenges include the secondary market and compliance implications with regard to high-cost mortgage loans and the Qualified Mortgage (QM) rule.
“Some significant barriers to refinancing smaller balances that the Bureau did not explicitly mention are associated with the secondary market and investor requirements, particularly those of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Mortgage Loan Corporation (Freddie Mac), collectively, the government-sponsored enterprises (GSEs), and the high-cost loan requirements of Regulation Z,” the CUNA added. “Oftentimes, refinancings of smaller balance loans also correlate with certain risk factors triggering loan-level pricing adjustments (LLPAs), reducing or eliminating any cost savings that might be enjoyed by virtue of the lower rate. The GSEs change loan-level pricing adjustments when a loan has any of a variety of characteristics. Many of these characteristics are commonly found in connection with low-income borrowers and refinances.”