CFPB a federal priority again – NMP

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Q. What activities are affecting the mortgage industry in relation to consumers?

A. The CFPB has finalized several rules designed to help consumers who have been financially impacted by the impact of the pandemic. In early 2021, the CFPB issued a final rule extending the mandatory compliance date for the rule defining qualifying mortgages under the Truth in Lending Act: General QM Loan Definition to October 2022. This delay was an attempt to help consumers by ensuring access to affordable mortgage loans and by maintaining flexibility.

The CFPB has also finalized a rule establishing interim procedural safeguards to ensure lenders consider loss mitigation options for mortgage borrowers before a credit servicer initiates foreclosure proceedings. Other recent CFPB rules include adjusting thresholds for various exemptions, including consumer credit transactions and ratings 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 across a variety of industries. It is believed that the CFPB could use some of these comments to consider additional regulations in the mortgage industry and others.

Q. What would be the implications of the CFPB’s extension of the Community Reinvestment Act to non-bank mortgage lenders? is it practical

A. It would be impractical for the CFPB to extend the Community Reinvestment Act (CRA) to non-bank mortgage lenders and it would probably be overkill. By law, the CRA only applies to banks. So it would take an act of Congress to amend the CRA to include non-banks. However, the intent of the CRA is to encourage bank investment through lending and other operations in low- and middle-income communities.

However, non-banks currently provide the vast majority of low and moderate home loans. So the intention of the CRA will not necessarily be achieved if the CFPB cannot regulate non-banks in this area because of these legal restrictions. To the extent that the CFPB or others are concerned about predatory lending practices by non-banks in low- and middle-income communities, this would be best addressed through legislation and alternative oversight.

Q. A prominent industry representative, while discussing the CRA issue, said that the CFPB appears to be looking for solutions to a problem. Do you feel that recent promotions permeates? Is the office proactive rather than reactive?

A. Inevitably, the office had to be proactive rather than reactive for two main reasons. First, the CFPB comes from a long period of inaction and disengagement. Second, financial services are now being offered in new ways and by new players, due to new technologies that may be accelerated by the needs created by the pandemic, which currently arguably are not captured by this current regulatory regime. While some view this proactive involvement in a positive light, others may see it as a solution in search of a problem, since bad actors do not necessarily appear to be involved in predatory practices.

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