Last Month, President Trump ousted Richard Cordray from the CFPB. While the bureau and the administration are still fighting over who the new interim director will be, a major change in direction at the agency is assured. This is most likely good news for the housing and mortgage industries.
Mortgage industry experts say that whoever leads the CFPB in the coming years should correct several practices at the agency.
End Regulation by Enforcement
Cordray was fond of failing to outline specific standards for assorted CFPB regulations. Instead, the agency under his watch seemed to enjoy offering the industry examples of regulation interpretation by taking legal action against lenders. Cordray explained his philosophy at a speech in 2016. He argued that it is the responsibility of the mortgage industry to determine what the actions of the CFPB means for the individual lender. Cordray said that mortgage lenders should look closely at their practices and fix whatever is not being done appropriately. But this leaves a lot to interpretation and can lead to paralysis in the industry.
Mortgage industry advocates argue a smarter policy is to simply be clear from the start what the regulations are, what is allowed and what is forbidden. The new CFPB director should make it a priority to state concrete rules about what is and what is not allowed when issuing mortgages.
Make It Easier for Small and Medium-Sized Lenders to Do Business
Critics charge that Cordray has created major problems for small and medium sized mortgage lenders. For instance, a court found in 2015 that the CFPB deprived a lender of its due process rights as it changed a long-standing interpretation of a law. It then fined the company a large amount for a breach of the new interpretation before the interpretation even existed as law.
Critics argue that no company in America should be treated in such a way by regulators. Under the previous director, the CFPB appealed a court ruling in the above matter. Hopefully, the new director will drop the case entirely.
There is more: Cordray’s record shows that he has engaged in executive overreach, opponents argue. He has found companies guilty of racial discrimination based upon mere guesses of people’s races by looking at last names. This resulted in compensation checks being mailed to white people for ‘discrimination.’ He also has tried to get around restrictions on the agency’s powers to regulate car loans and to put caps on interest rates for mortgage and car loans.
Hold the CFPB to High Standards
Critics of the bureau argue that the CFPB had a toxic culture from the start that encouraged discrimination against minorities and females. In 2014, the agency had to testify before Congress for alleged unequal treatment of Hispanics, African Americans, women and people over 40.
A 2016 report from the GAO stated that the CFPB had made progress, but 40% or more of black employees at the agency disagreed with the statement that career success at the bureau is based upon merit rather than favoritism.
Critics charge that the CFPB is highly hypocritical. After all, it is a federal government agency that has been charged with punishing discriminatory lending practices. Many say that new bureau leadership should work hard to change this so that the mortgage industry feels that it is being held to high standards by an agency that holds itself to the same standards.
Provide Congressional Oversight of the CFPB
The Dodd Frank Act allows the CFPB currently to work without oversight from Congress. This means that it is not really accountable to the voters. The agency gets its funding from the Department of the Treasury and not Congress. Mortgage industry professionals say that the Dodd Frank Act should be revised so that the CFPB is overseen by Congress.
Better Protect Consumer Data
The CFPB has information on more than 600 million credit accounts. This includes highly sensitive consumer information. A GAO audit in 2014 found there were many problems with how this data is protected from hackers. The GAO did note later that the agency had made progress with data loss prevention, but there is still much work to be done.
Critics note that the CFPB has been critical of Equifax due to data breaches recently that put consumer data at risk, but if the CFPB is hacked, consumers could be even worse off. The bureau has information on the types of loans you have, your payment history, arbitration case records, data from DMVs, information on overdraft fees and more.
CFPB Changes HMDA Data Collection &
The Consumer Finance Protection Buerau announced the agency was increasing the 2017 threshold of $44 million to $45 million for 2018. Thus, depository institutions with assets of $45 million or less as of December 31, 2017 will be exempt from collecting HMDA data in 2018.
CFPB Adjusts TILA Escrow Thresholds for Home Mortgages
Regulation Z, which implements TILA, requires creditors to establish an escrow account to pay property taxes and insurance premiums for specific higher-priced first mortgage liens. Read more on the new CFPB rules.
What You Need to Remember
The CFPB generally has made it harder for small and medium sized mortgage lenders to issue loans. This has hampered the housing and mortgage industry and the American economy as a whole. It is hoped that a more pro-business CFPB director will be able to safeguard consumer rights while allowing more mortgage loan activity.
Contact the CFPB directly at https://www.consumerfinance.gov/consumer-tools/mortgages/
References: Here’s What the CFPB Director Should Change. (2017, November). Retrieved from