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.