What will CFPB changes mean for mortgage borrowers?

Dan Rafter
Written by
Dan Rafter
Read Time: 5 minutes

Mortgage lenders aren't shedding too many tears over the departure of former director Richard Cordray from the Consumer Financial Protection Bureau.CFPB changes

But what will the changes at the CFPB mean to mortgage borrowers and other consumers, now that President Trump has appointed a dedicated foe of the agency to be its director? That's far from clear.

What isn’t in doubt is that the Consumer Financial Protection Bureau, won’t be quite as aggressive in levying fines and penalties against businesses. Mick Mulvaney, Trump’s appointment to head the bureau, is a long-time critic of the Consumer Financial Protection Bureau, after all, charging it with overreaching in its role as a consumer watchdog.


The history

The Obama administration created the Consumer Financial Protection Bureau to protect consumers from deceptive or abusive business practices. According to the bureau's information, the bureau has provided $11.9 billion in relief to consumers and has handled more than 1.2 million complaints.

The bureau, though, has long been targeted by Republican critics -- and Pres. Trump -- as being anti-business. These critics worry that the bureau's regulations unnecessarily hamper lenders and businesses.


A regime change

It was little surprise, then, that when the director of the bureau, Cordray, announced plans that he was stepping down, Trump moved to install a critic of the government agency as its head, Mick Mulvaney, director of the Office of Management and Budget.

Cordray tried to name his own successor, but a federal judge in November determined that Trump had the right to fill the vacancy. That left Mulvaney as acting director.

This controversy threw the agency into chaos, according to stories by USA Today, Business Insider and others. But it's not clear that having a new leader will impact consumers looking for mortgage loans.

Tony Davis, senior loan officer with Movement Mortgage in Alpharetta, Georgia, said that he doesn't expect the leadership of the Consumer Financial Protection Bureau to roll back most existing mortgage regulations. Rules changes that have been enacted -- including new disclosures meant to make it easier for consumers to understand what exactly they're paying for when taking out a mortgage -- should remain in place, he said.

But Davis did say he expects to see a sharp decrease in the number of enforcement actions and fines levied against mortgage lenders.

"I doubt there are too many folks in the mortgage industry crying themselves to sleep over Cordray leaving the CFPB," Davis said.


New disclosure forms detailed mortgage costs

The one rules change from the bureau that had the biggest impact on consumers is arguably the Know Before You Owe mortgage disclosure rule.

mortgage disclosure formsThis rule mandates that lenders must provide mortgage borrowers with two key forms spelling out exactly what these buyers will pay for their home loans. The Loan Estimate is a three-page form that borrowers receive after applying for their mortgage. Lenders must provide borrowers with this estimate within three business days after they receive their loan applications.

The Loan Estimate includes a loan's estimated mortgage rate, monthly payment and total closing costs.

At least three business days before consumers close on their mortgages, lenders must provide them with a five-page Closing Disclosure. This disclosure provides the final details and costs of a mortgage. Consumers are supposed to compare this disclosure with their loan estimates to make sure that the costs listed on the Closing Disclosure are close to those estimated on the original Loan Estimate.

The bureau said that these documents offer added protection to consumers. Armed with detailed information on closing costs and interest rates, the disclosures make it easier for borrowers to shop for the lowest-cost mortgage, according to the bureau.

These new documents, known as TRID -- for TILA RESPA Integrated Disclosures -- replaced four existing documents that lenders formerly used to disclose loan information: the Truth-in-Lending disclosure, Good Faith Estimate, a final Truth-in-Lending disclosure and the HUD-1 Settlement Statement.


Unhappy lenders

Lenders said that the new documents were forced onto them and that many were not prepared for the changes.

"The CFPB transformed the way we originated mortgages after the housing crisis," said Jeremy David Schachter, mortgage advisor and branch manager with Pinnacle Capital Mortgage in Phoenix. "Some changes were too extreme and some were needed."unhappy lenders

Schachter said that TRID was an example of the latter, a rule that wasn't needed.

"Many lenders were not prepared for it and either went out of business or had huge fines for not being compliant," Schachter said. "As a loan officer for many years, this is the new normal. Do I hope that new leadership has an impact on easing some regulations? Absolutely. Do I think this will happen? Probably not."

Not everyone, of course, thinks that the changes will be beneficial. Officials with the Durham, North Carolina-based Center for Responsible Lending, said that the move to put the bureau under the leadership of Mulvaney will hurt consumers.

"The 2008 financial crisis showed us that people need an independent regulator to protect people from financial abuse," said Melissa Stegman, senior policy counsel for the center, in a written statement. "Appointing Mulvaney, who currently reports to the president, as acting director defeats the purpose of an independent CFPB."

Rich Dubois, executive director of the National Consumer Law Center in Washington, D.C., also said that the Consumer Financial Protection Bureau will be weakened by Cordray's departure, and that Mulvaney, who has stated in the past that he'd like to eliminate the bureau, is a bad decision for consumers.

"The Consumer Bureau was created after neglect of consumer protection brought America to its knees," Dubois said in a statement. "In just six short years, under Cordray's direction, the consumer watchdog has made the financial marketplace safer and fairer. Americans firmly support strong rules for the financial industry, no matter their political beliefs."

Jon Boyd, a real estate agent and broker/manager of The Home Buyer's Agent of Ann Arbor in Ann Arbor, Michigan, said that the new leadership at the Consumer Financial Protection Bureau should have little to no impact on the consumers with which his agency works.

Yes, a bureau led by the Trump administration might be less apt to levy fines against lenders. It might also reduce the amount of regulations on businesses. But for people buying homes or taking out mortgages? Changes at the bureau probably won't add up to much, Boyd said.

"We don't anticipate any significant changes for the consumers we work with," Boyd said. "The CFPB forced a lot of changes on the home-loan industry. But now that those changes have been integrated into the marketplace, I don't see a need for the new management to remove them."



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