Lending

House Committee grills Cordray on QM, mortgage regulations

Republicans still want more accountability, Democrats push back

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Consumer Financial Protection Bureau Director Richard Cordray appeared before the House Financial Services Committee on Tuesday afternoon for his semi-annual report to Congress.

Cordray's full remarks can be read here

House Financial Services Committee Chairman Jeb Hensarling, R-Texas, continued his ongoing criticism of the CFPB as unaccountable.

“The CFPB undoubtedly remains the single most powerful and least accountable Federal agency in all of Washington,” Hensarling said. “When it comes to the credit cards, auto loans and mortgages of hardworking taxpayers the CFPB has unbridled, discretionary power not only to make those less available and more expensive, but to absolutely take them away.

“Consequently, Americans are losing both their financial independence and the protection of the rule of law. The bureau is fundamentally unaccountable to the president since the director can only be removed for cause. Fundamentally unaccountable to Congress because the bureau’s funding is not subject to appropriations,” he said. “Fundamentally unaccountable to the courts because Dodd-Frank requires courts to grant the CFPB deference regarding its interpretation of Federal consumer financial law. Thus, the bureau regrettably remains unaccountable to the American people. That is why we need the CFPB on budget and led by a bipartisan commission; mere testimony is not the equivalent to accountability.”

Hensarling said that Democrats who worry the CFPB is being unfairly attacked aren’t seeing the big picture.

“I was struck by a comment made by one of my Democratic colleagues who argued during the Committee’s markup of our budget views and estimates that the Bureau must be protected from ‘the whim of whoever are the legislators.’  I remind all of my colleagues that “the legislators” are chosen by the American people under the provisions of our Constitution,” he said.

He said CFPB actions are hurting the financial industry, not protecting consumers.

“Free checking has been cut in half. QM increasingly stands for ‘Quitting Mortgages’ as community bank after community bank finds they can no longer offer mortgages to many of their deserving customers,” Hensarling said.

Ranking member Maxine Waters, D-California, meanwhile, praised the CFPB’s track record, saying it has delivered $5.3 billion in relief to 15 million American consumers and service members since its inception in 2011.

 Waters highlighted the many ways that she says Republicans have worked to harm the consumer agency, citing efforts to advance legislation that would undermine the agency’s ability to shield consumers from duplicitous financial practices, end its autonomy, dismantle its leadership and bog down operations with countless requests for documents.

“Taking their strategy from Wall Street, predatory lenders and other bad actors in our financial system – the Republicans on this Committee have advanced countless measures that would undermine the CFPB’s ability to protect consumers from deceptive marketing, unlawful debt collection, lending discrimination, illegal fees, and other unscrupulous activity,” Waters said. “This includes legislation to destabilize CFPB’s leadership, end its autonomy, and tie its independent funding to the whims of the Congressional appropriations process.”

Rep. Randy Neugebauer, R-Texas, Chairman of the Financial Services Subcommittee on Financial Institutions and Consumer Credit, said consumer protection must be done in a smart, tailored, and politically- neutral manner. 

“It should not be used to advance ideological policies. If the pendulum of consumer protection swings too far, you have nothing left to protect,” Neugebauer said.

“Today, we are approaching the five year anniversary of the Dodd-Frank Act, which created the CFPB. Unfortunately, since its creation I see an agency that has yet to prove it can function in a sustainable manner. Its actions have demonstrated a lack of transparency and lack of accountability. It has demonstrated it is susceptible to political influence – bringing into question its independence. “Some of my Democratic colleagues will allege that Republicans want to get rid of the CFPB. I look back over the last five years and see a field of proposals to restructure the CFPB- not get rid of it.

“This week, I will be introducing the first of several bills to restructure and refocus the CFPB.   Perhaps one of the most important reforms is to introduce a balanced and consultative process into its decision-making,” he said. “Many have forgotten that Sen. Elizabeth Warren, our former colleague Barney Frank, and even the President originally supported a board leadership structure.”

The American Land Title Association, the national trade association of the land title insurance industry, was critical of Cordray and the CFPB ahead of the hearing.

“In 150 days, new disclosure forms for real estate transactions will completely change the homebuying process as it’s known today,” said Michelle Korsmo, ALTA’s chief executive officer. “As our member companies work to implement these new forms on Aug. 1, we strongly urge Director Cordray to announce a five-month restrained enforcement period so that new business processes can be adjusted to comply with these regulations. As with previous regulatory reform, only when the new forms are in practice will many issues and defects be discovered. A restrained enforcement period helps our members, and the broader real estate industry, make the changes needed to their business processes and collaborate with industry and regulators to ensure the consumer has a positive experience at the closing table.

“Unfortunately, we’re already aware of one major problem with the new CFPB forms,” Korsmo stated. “The Bureau’s Closing Disclosure, which replaces the current HUD-1 Settlement Statement, inaccurately discloses the fees associated with title insurance premiums for consumers. State law and regulation in half of the United States dictates that consumers must pay title insurance rates that are different than how the CFPB requires industry to inaccurately disclose these fees to the consumer.”

Korsmo said every homebuyer should be informed about the accurate costs of homeownership—including what they pay for each service during the real estate closing process.

“For many consumers, buying a home is the single largest investment they will make in their lifetime. It’s critical that Director Cordray and the CFPB staff adjust the disclosure forms prior to Aug. 1 to ensure consumers receive accurate information about their mortgage costs,” Korsmo said. “ALTA and our member companies stand ready to help the Bureau ensure consumers are neither confused nor misled at the closing table.”

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