What do you think about the CFPB's recent performance?
- They're completely superfluous. (55%, 18 Votes)
- They're not doing enough to protect consumers. (18%, 6 Votes)
- They're doing a great job with a difficult task. (15%, 5 Votes)
- It doesn't matter, as long as it doesn't affect my business. (12%, 4 Votes)
Total Voters: 33
Dodd-Frank gave the CFPB the honor of breathing new life into the HMDA, which was enacted in 1975 but has since been outmoded by new financial technologies and the largess of mortgage market giants. The CFPB is tasked with bringing the act up to date by mandating the inclusion of new information to assist regulators with spotting troubling trends.
First on their agenda is to collect better information. This includes the:
- length of the loan term;
- total points and fees charged to the borrower;
- length of “teaser” or introductory rates; and
- borrower’s age and credit score.
It’s surprising these data are not already included in the information lenders are required to disclose to regulators. But in 1975, when the HMDA came into being, regulators were dealing with a different lending paradigm. The issue of disclosing the length of teaser rates and a total reckoning of points and fees is a lesson learned from the subprime mortgage crisis, when access to credit was too lenient, rather than the other way around.
Knowing the borrower’s age and credit score is especially helpful in conjunction with monitoring consumer access to credit. Under the current rules, lenders are not required to submit an explanation of denied credit applications. An explanation for denial of credit provides regulators the full picture of credit access. It also provides a way to monitor qualified mortgage (QM) implementation to ensure it does not unduly impede borrower credit access.
In addition to the proposed changes to the HMDA, the CFPB has already developed an HMDA tool publicly available online. The spirit of the HMDA is for communities to act as their own watchdogs to ensure equal credit access for all. The new tool is easy to use and provides instant results for anyone – from professional mortgage loan originators (MLO) to individual borrowers.
The CFPB has already jumped head first into the business of enforcing the act as it stands, which we applaud them for. However, the tortoise-like pace of this reform is a bit of a stain on their otherwise impressive regulatory record. Dodd-Frank was passed in 2010, uh hum!
Consider it this way: with such an opaque, muddled and confusing system of disclosures, the big banks may justifiably argue that government inaction to clean up the regulations is impeding the flow of the free market. Allowing any steam to gain behind this argument will only prolong reform and continue to allow the banks to regulate themselves, so to speak.
From the looks of their press release, the CFPB already knows what needs to be done. We’re not sure what the point is of the Small Business Review Panel, other than political posturing of course.