CFPB Once Again A Federal Priority

In addition to increased rulemaking and outreach, there has also been an enforcement uptick.

Mortgage Banker Magazine
Mortgage Banker Magazine

Q. What is some of the activity affecting the mortgage industry in terms of consumers?

A. The CFPB finalized several rules meant to help consumers financially impacted by the effects of the pandemic. Earlier in 2021, the CFPB issued a final rule that extends the mandatory compliance date for the Qualified Mortgage Definition rule under the Truth in Lending Act: General QM Loan Definition to October 2022. This delay was an attempt to help consumers by assuring access to affordable mortgage credit and by preserving flexibility. 

The CFPB also finalized a rule that establishes temporary procedural safeguards to ensure that lenders consider loss mitigation opportunities for mortgage borrowers before a loan servicer initiates foreclosure proceedings. Other more recent CFPB rules include adjusting thresholds for various exemptions including consumer credit transactions and appraisals for higher-priced mortgage loans. 

In addition, early in the administration, the CFPB issued a broad notice and opportunity to be heard inquiring whether consumers had issues with a variety of industries. It is thought that the CFPB may use some of those comments to consider additional rulemaking in the mortgage industry as well as other.

Q. What would the impact be of the CFPB expanding the Community Reinvestment Act to cover nonbank mortgage lenders? Is it practical? 

A. It would not be practical for the CFPB to extend the Community Reinvestment Act (CRA) to cover nonbank mortgage lenders and to do so would likely be overreaching. The CRA by statute only applies to banks. So, it would require an act of Congress to amend the CRA to include nonbanks. That said, the intent of the CRA is to encourage bank investment through lending and other operations in the low- and moderate-income communities. 

However, nonbanks currently comprise the vast majority of low and moderate home mortgage loans. So, the intent of the CRA is not necessarily being achieved if the CFPB cannot regulate nonbanks in this arena due to those statutory limitations. To the extent, the CFPB or others are concerned about nonbank predatory lending practices in the low and moderate income communities, it would be best addressed through statute and alternative oversight.

Q. One prominent industry official said, when discussing the CRA issue, that the CFPB seems to be looking for solutions in search of a problem. Do you feel that pervades the recent actions? Is the bureau being more proactive instead of reactive? 

A. The bureau has necessarily needed to be more proactive rather than reactive for two main reasons. First, the CFPB is coming off a lengthy period of inaction and disengagement. Second, due to new technology as possibly accelerated due to the necessities caused by the pandemic, financial services are now being offered in new manners and by new players, arguably not currently covered by this current regulatory scheme. While some may view this proactive involvement in a positive light, others may view it as a solution in search of a problem in that there do not necessarily appear to be bad actors engaged in predatory practices.

Q. Another issue that seems like it would affect the mortgage industry is proposed open banking rules. Reuters has reported they could dramatically boost consumer finance competition and increase Americans' access to financial services, but changes are being held up by privacy concerns. What is your perspective on this issue? 

A. The privacy concerns implicated by open banking are certainly real, but open banking also definitely has the potential to boost consumer finance competition. While it seems appropriate for consumers to have access to all their financial data and information as well as the ability to provide others with access to the information for specifically authorized purposes, the flow of this type of information obviously comes with significant consumer privacy concerns. This is in part because banks and other financial institutions typically have stringent but costly cybersecurity and privacy standards that fintech companies often just do not have. 

Q. How would you rate Director Chopra’s first six months in office? 

A. Director Chopra is very active and is certainly reinvigorating the CFPB that the previous administration essentially tried to shut down. He has made huge efforts to study the industry and solicit information about consumer needs and industry concerns relating to over regulation. However, by looking for new issues rather than focusing on the issues that the industry already knows exists, Director Chopra may be spreading the bureau too thin and missing the opportunity to make a significant impact where it is really needed as opposed to where an issue does not exist in the first instance.

Q. Any issues flying below the radar that people should be aware of? 

A. Director Chopra and the CFPB have been a topic of much discussion. Not much is flying under the radar at this point as all eyes are on this agency. With that said, it is important to pay attention to the activities that the agency is seeking input on as it is likely that we will see new rulemaking directed at those areas to address the changing industry.

Bonnie Hochman Rothell, Partner
Morris, Manning & Martin, LLP
[email protected]

Jessica A. Rodriguez, Associate
Morris, Manning & Martin, LLP
[email protected]

Mortgage Banker Magazine
Mortgage Banker Magazine
This article was originally published in the Mortgage Banker Magazine August 2022 issue.
Published on
Jul 20, 2022
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