Q. What is the activity affecting the mortgage industry in terms of consumers?
A. The CFPB has finalized several rules intended 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 Definition of QM Loans to October 2022 This delay was an attempt to help consumers by ensuring access to affordable loans. mortgage credit and maintaining flexibility.
The CFPB also finalized a rule that establishes temporary procedural safeguards to ensure lenders consider loss mitigation opportunities for mortgage borrowers before a loan servicer begins foreclosure proceedings. Other more recent CFPB rules include adjusting thresholds for various exemptions, including consumer credit transactions and appraisals for higher-priced mortgages.
In addition, early in the administration, the CFPB issued a broad notice and opportunity to be heard asking if consumers had issues with a variety of industries. It is believed that the CFPB could use some of these comments to consider the development of additional rules in the mortgage sector as well as others.
Q. What would be the impact of the CFPB expanding the Community Reinvestment Act to cover non-bank mortgage lenders? Is it practical?
A. It would be impractical for the CFPB to extend the Community Reinvestment Act (CRA) to cover non-bank mortgage lenders and would likely be overkill. CRA, by law, only applies to banks. Thus, it would take an act of Congress to amend the CRA to include non-banks. That said, ARC’s intention is to encourage bank investment through loans and other operations in low- and middle-income communities.
However, non-banks currently account for the vast majority of low and moderate mortgages. Thus, the intent of the CRA is not necessarily achieved if the CFPB cannot regulate non-banks in this area due to these statutory limitations. To the extent that the CFPB or others are concerned about predatory non-bank lending practices in low- and middle-income communities, it would be best tackled through legislation and alternative oversight. .
Q. A senior industry official said when discussing the ARC issue that the CFPB seems to be looking for solutions looking for a problem. Do you think that permeates recent actions? Is the office more proactive than reactive?
A. The office necessarily had to be more proactive rather than reactive for two main reasons. First, the CFPB is emerging from a long period of inaction and disengagement. Second, due to the possible acceleration of new technologies due to the necessities caused by the pandemic, financial services are now being offered in new ways and by new players, arguably currently not covered by the current regulatory regime. While some may see this proactive involvement in a positive light, others may see it as a solution in search of a problem in that there don’t necessarily seem to be bad actors engaged in predatory practices.