Key Takeaways:
– The Consumer Financial Protection Bureau (CFPB) published a report analyzing state-level community reinvestment laws and their impact on entities including mortgage companies.
– The report focuses on seven states and the District of Columbia that largely followed the federal Community Reinvestment Act (CRA) in promoting reinvestment activities.
– The federal CRA has a narrower focus on banks, while states have more flexibility to include nonbank mortgage companies in their community reinvestment guidance.
– The report highlights five key findings, including the application of affirmative lending obligations to mortgage companies and the use of independent performance examinations by some states.
– Some states go beyond the federal CRA requirements and tailor their reinvestment obligations based on market conditions.
– The report emphasizes the changing landscape of the financial market, with nonbank mortgage companies capturing a significant share of the mortgage market. States have responded by creating reinvestment obligations for mortgage companies to meet the needs of their local communities.
HousingWire:
The Consumer Financial Protection Bureau (CFPB) this week published a report analyzing state-level community reinvestment laws and ways they promote reinvestment activities for entities including mortgage companies.
The 32-page report features details about the ways state governments aim to ensure financial institutions’ lending, services and investment activities meet the credit needs of their local communities, including mortgage companies, credit unions and banks.
Seven states are primarily featured in the analysis, including Connecticut, Illinois, Massachusetts, New York, Rhode Island, Washington, West Virginia as well as the District of Columbia. The report found that those parts of the country largely followed the lead of the federal Community Reinvestment Act (CRA) in the decades following its 1977 passage.
The federal CRA has a much narrower focus on banks, while states have broader latitude to include other kinds of institutions in their own community reinvestment guidance, including nonbank mortgage companies, the CFPB explained.
“Banks now originate and hold a much smaller share of outstanding mortgage debt than they did when the legislation was originally enacted,” the CFPB said in an announcement. “In 1977, banks held 74% of outstanding mortgage debt. By 2007, this share had declined to just 28%. As of 2021, nonbank mortgage companies originated 64% of conventional home purchase mortgage loans, compared to the 25% originated by banks.”
The report includes five key findings, including details on how some states “apply an affirmative lending, service delivery, and investment obligation to mortgage companies, in addition to deposit-taking institutions.”
Some states also conduct independent performance examinations of lending, services and investments while other states include federal performance data alongside their own examinations. Certain enforcement mechanisms include limitations on mergers, acquisitions, branching and/or licensing. Some states go even further.
Certain states also go beyond the requirements of the federal CRA when evaluating lending, financial services or other investment activities in their states. State legislatures also change their CRAs depending on the realities of market conditions at a given time.
“The financial market has changed considerably since the passage of the Community Reinvestment Act, and nonbanks are now capturing a large share of the mortgage market,” said CFPB Director Rohit Chopra in a statement. “States have responded by creating reinvestment obligations for mortgage companies and have tailored state reinvestment requirements to meet the needs of their local communities.”
Source link
Property Chomp’s Take:
The recent report published by the Consumer Financial Protection Bureau (CFPB) sheds light on how state-level community reinvestment laws promote reinvestment activities for various entities, including mortgage companies. The 32-page report analyzes the efforts made by state governments to ensure that financial institutions, such as mortgage companies, credit unions, and banks, meet the credit needs of their local communities.
The report focuses on seven states, namely Connecticut, Illinois, Massachusetts, New York, Rhode Island, Washington, West Virginia, and the District of Columbia. These states have largely followed the lead of the federal Community Reinvestment Act (CRA) since its inception in 1977.
While the federal CRA primarily focuses on banks, state-level community reinvestment laws provide greater flexibility to include other institutions, such as nonbank mortgage companies. This is significant because over the years, nonbank mortgage companies have gained a substantial share of the mortgage market. As of 2021, nonbank mortgage companies originated 64% of conventional home purchase mortgage loans, compared to the 25% originated by banks.
The report highlights five key findings, one of which is that some states impose affirmative lending, service delivery, and investment obligations on mortgage companies, in addition to deposit-taking institutions. Moreover, certain states conduct independent performance examinations of lending, services, and investments, while others incorporate federal performance data alongside their own examinations. To enforce compliance, some states impose limitations on mergers, acquisitions, branching, and licensing.
It is worth noting that certain states go beyond the requirements of the federal CRA when evaluating lending, financial services, or other investment activities. State legislatures also have the flexibility to adapt their community reinvestment laws based on market conditions at any given time.
CFPB Director Rohit Chopra acknowledges the changing landscape of the financial market and the growing presence of nonbank mortgage companies. He emphasizes that states have responded to these changes by creating reinvestment obligations specifically for mortgage companies, tailored to meet the needs of their local communities.
In conclusion,
