The Effect of New Mortgage-Underwriting Rule on Community (Smaller) Banks’Mortgage Activity

Abstract

The Consumer Financial Protection Bureau (CFPB), government agency created through the Dodd Frank Act, enacted the Ability-to-Repay (ATR) and Qualified Mortgages (QM) rule in January 2014. Using a new survey on Community banks from 2014 and Home Mortgage Disclosure Act Data (HMDA) for the years 2011-2014, I look at the effect of the ATR/QM rule on mortgage origination. From the survey responses, we infer that community banks in the sample expected and increase in compliance costs, and a possible decrease in mortgage origination. However, analysis of the HMDA suggests that the ATR/QM rule has not disrupted community banks mortgage origination.