[Update: Reply from CFPB added 5:45 a.m. CT]
The Consumer Financial Protection Bureau unveiled its new borrower education tool on Tuesday, and some have noticed that there’s something odd about it.
That is, if it were a lender advertisement or mortgage calculator, it would violate the CFPB’s disclosure rules.
It would be, as one industry voice puts it, rate baiting.
“It’s actually disappointing the bureau would put this out,” David Stevens, president and CEO of the Mortgage Bankers Association, tells HousingWire. “I’m not a CFPB knee jerk. They do a lot of good and while I think things can be improved, we’re on board with them. But this wasn’t well thought out.”
Owning a Home is actually a suite of tools meant to better inform and empower consumers shopping for a mortgage. The "tool" involves taking the consumer from the very start of the home-buying process, with a guide to loan options, terminology and costs, through to the closing table with a closing checklist.
Included in the suite of tools is the Rate Checker. In its beta release, this tool is supposed to help consumers understand what interest rates may be available to them by using the same underwriting variables that lenders use on their internal rate sheets.
“In other words, we are giving consumers direct access to the same type of information that the lenders themselves have,” said CFPB Director Richard Cordray previously.
Stevens says that the tool doesn’t inform borrowers of a host of other costs that lenders are required to disclose under TILA-RESPA, such as closing costs, APR, and other charges and fees, Stevens added.
“This tool has none of that. It gives borrowers none of that,” Stevens said. “It could allow lenders to rate bait the market.”
The third-party tool offers accurate but incomplete information, Stevens added.
“It’s not false data but incomplete data. We’re not saying they’re wrong, but not including all that the lending community is required to disclose borders on irresponsibility.
“It sets borrowers up for severe disappointment,” Stevens said. “It should be taken down.”
In a statement, the CFPB says the concerns are unfounded.
“The Rate Checker is an educational tool, and part of a larger suite of tools to help consumers be more informed and effective mortgage shoppers. The Rate Checker does not connect consumers with lenders,” a spokesperson for CFPB told HousingWire.
“As explained on the website, interest is only one of many costs associated with getting a mortgage. Before making a final decision, consumers should compare Good Faith Estimates from multiple lenders, which include all of these costs,” the spokesperson said. “In August, the new Know Before You Owe mortgage disclosure forms will make it even easier for consumers to compare the costs and features of different loans and choose the deal that’s best for them.”
Stevens emphasized that he is a supporter of Cordray and his team, but that they should have consulted the mortgage lending industry before unveiling this tool, for which no advance notice was given.
“Providing information on comparing rates and borrowers educating themselves is fine, but this will lead to too many false impressions,” Stevens said.