CFPB Director Explains Ability To Repay Rule

Richard Cordray attended POLITICO’s November Morning Money Breakfast and spoke about new CFPB regulations and the goals of the bureau going forward.


The Consumer Financial Protection Bureau is reeling in lending practices and protecting consumers, according to its director Richard Cordray.

The CFPB’s first and only director to date spoke earlier this month in Washington, D.C. at event sponsored by POLITICO.

Chief POLITICO Economic Correspondent Ben White asked Cordray if consumers are safer today than in 2009? Essentially, he asked has the CFPB done what it was designed to do. Cordray’s response was immediate and unequivocal.

“There’s no question that the mortgage market will be safer and function better with our new rules that take effect January 10,” Cordray told White referring to the CFPB’s Ability to Repay and Qualified Mortgage regulations that go into effect early 2014. “They are designed to root out some of the worst and most irresponsible practices that marred the mortgage market and blew up the economy. And there’s no question it was the mortgage market in particular that caused the credit freeze, the financial crisis, and then the ensuing recession that we’re still digging out from.”

The Ability to Repay and Qualified Mortgage standard requires creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling and establishes certain protections from liability under this requirement for qualified mortgages. Or, as Cordray told the audience, “banking or lending 101.”

Because lenders could sell loans to the secondary market, some failed to pay close attention to a borrower’s ability to repay, which led us to the financial crisis in 2007 and 2008.

Responsible lenders have already been complying with the rule. According to Cordray, if your institution has underwriting standards and loans have performed well through the crisis, then you should continue making those loans, whether they are in the qualified mortgage category or not.

The most encouraging takeaway from Cordray’s talk is the steadfast commitment he has to consumer education, a task that is close to home for many institutions in the credit union movement.

“We have to do a better job of educating people in this country about how to handle their finances,” he says. “And it starts with the schools and it starts with young people, but it’s true of all of us. We have neglected that point and it makes everything harder for people, it makes everything worse in terms of making choices that they can live with and not end up regretting. It is really a scandal and a shame that this country has not paid better attention to that and done a better job. If we don’t have real discernable progress in that in the coming years than I will be disappointed in myself and in the bureau.”

When it comes to financial education, it seems the credit union movement has a friend in the CFPB’s highest office.

See video of the talk here.


Nov. 19, 2013


  • The man is a borderline idiot...typical "non speak" from a Washington politician. Say nothing long enough and it all starts to make sense...
    eponymously yours
  • Uhh, the title is misleading. Where's the "explanation"? Cool blog.
  • i wasn;t observant enough to see in the article that there is an explanation from Cordray (or from the author) on the ability to repay rule...
  • This doesn't explain 'ability to pay means'. Lenders we need definitive guidelines. They are all making good faith efforts to determine our borrower's ability to pay. It is, ultimately, to the their advantage make the correct underwriting decisions. In addition, the lender's ability to sell their loans on the secondary market is largely based on customer's payment behavior. Why wouldn't the lenders pay close attention to the borrower's ability to pay? Only good paper, in essence is worth anything on the secondary market. I think CFPB may need to take a lesson on Lending 101...
    Timothy Li