The Roadmap to CFPB 2.0

roadmap

Last year, MBA responded to a series of 12 requests for information (RFIs) issued by the Consumer Financial Protection Bureau (CFPB or the Bureau), looking for ways the CFPB could better serve its statutory mission by improving its supervisory practices and regulatory framework. I, along with others in our industry, was encouraged by the Bureau’s openness to listening to stakeholder proposals to improve its regulation and enforcement to ensure strong consumer protections.

Today, we released an overview of our proposed reforms in The Roadmap to CFPB 2.0, a follow-up to our 2017 paper, CFPB 2.0: Advancing Consumer Protection. MBA’s proposals bring together the broad reforms we outlined in CFPB 2.0 with the specific recommendations in our responses to the RFIs. The Roadmap is designed to better protect consumers with increased competition and clear, consistent regulations and enforcement. Since 2011, the Bureau has done a lot of work to ensure that all consumers have access to financial products and services that are fair, transparent, and competitive. This has led to a fundamental transformation of the regulatory landscape that has had unintended consequences, and no sector has been impacted more than the housing finance industry.

When I talk with MBA members, one of their top concerns is the uncertainty and regulatory burden that have stifled innovation and competition. Unclear guidance from the Bureau and regulation through enforcement do consumers no favors. In fact, a lack of clear guidance has discouraged lenders from expanding consumer access to sustainable credit. It has also led to competition based on willingness to take on more compliance risk – contrary to CFPB’s goal of fostering stable markets. Homebuyers would be better served by clear, authoritative guidance that would do away with much of the guesswork that lenders have had to engage in to divine the Bureau’s regulatory intentions.

MBA’s Roadmap offers a set of recommendations that will help the CFPB to mature from a “startup” agency to a stable, non-political regulator that can better protect consumers. While much of the CFPB’s work is well intended, the use of consent decrees and administrative decisions to make changes in the rules — rather than using rulemaking or published guidance — has created uncertainty in the market and undue costs for consumers that need to be ended.

In addition to improved regulation and enforcement, I’d like to highlight just a few of the Roadmap’s other proposals that would improve competition and expand access to housing finance. MBA is calling for reforms to the loan officer compensation (LO Comp) rule that would give loan officers the flexibility to lower borrower costs while also being held accountable for mistakes on loan disclosures. Our recommendations would also increase access to affordable mortgage credit for low-income and underserved consumers by allowing variable compensation for state and local housing finance agency loans.

MBA is also calling for modest refinements to the Bureau’s Ability to Repay/Qualified Mortgage Rule (ATR/QM Rule), which creates liability when a borrower defaults and is able to show the lender failed to adequately assess the borrower’s ability to repay. The rule applies a “one-size-fits-all” approach to determining whether a loan meets the Qualified Mortgage standard, which makes it difficult for many lenders to provide mortgage credit for borrowers with non-traditional income sources, like “gig economy” workers.

I encourage you to read the paper for a comprehensive inventory of MBA’s reform proposals. We look forward to working with the Bureau to create a more transparent and authoritative regulatory framework that would better protect consumers and expand access to homeownership.

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