Two more industry groups join the campaign against the Consumer Financial Protection Bureau’s Rate Tracker.
The Community Home Lenders Association and Community Mortgage Lenders of America wrote Thursday in a joint letter that the CFPB should take the online Rate Tracker off its website.
The Mortgage Bankers Association and the National Association of Mortgage Bankers said last week they think the tool is misleading and shouldn’t have been launched.
The online tool has come under fire because it mentions rates and costs without including disclosure items that TILA-RESPA rules mandate for borrowers – annual percentage rate, points, closing fees and other charges.
The CFPB has said in a statement to HousingWire that the Rate Tracker won’t be taken down.
“The CHLA and CMLA support CFPB’s underlying goal of trying to assist consumers in obtaining the best mortgage possible and to encourage them to shop for a loan. As the only national association exclusively representing nonbank mortgage lenders, which originate the majority of loans to low and moderate-income homebuyers, CHLA members pride ourselves both on the services we provide and the competitiveness of the mortgage products we offer. Similarly the CMLA, which represents both bank and nonbank community-based lenders, is committed to the principle that the best borrower is a fully informed borrower,” the joint letter states.
“However, we believe there are a number of problems with the Rate Tracker tool, including unintended consequences which could work to the detriment of low and moderate income homebuyers, and we are unclear whether they can be fixed to make this tool workable,” the letter states. “We also have concerns that this was developed without sufficient input and data from community mortgage lenders.”
CHLA and CMLA are concerned that the tool, as implemented, does not fully take into consideration a wide range of variables that can have an effect on mortgage rates. These include the FICO score of the borrower; the mortgage Loan to Value; the loan amount; the loan type, location of the property; whether it was a purchase or refinance loan and other factors.
“Our concern is that by focusing on average rates, the Rate Tracker tool might mislead certain borrowers about what they can expect with respect to a mortgage loan, which could set them up for disappointment if, as will often be the case, they do not qualify for the average rate,” they say.
MBA and NAMB raised these concerns as well.
“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,” David Stevens, president and CEO of the MBA, told HousingWire last week. “It sets borrowers up for severe disappointment,” Stevens said. “It should be taken down.”
“This tool will do nothing but confuse consumers in their shopping experience,” said John Councilman, president of NAMB, told HousingWire last week. “These rates do not account for closing costs, APR, Loan Level Price Adjustments or other key factors. More important than rate is quality of service and closing reputations of others involved in the transaction.
“If a private company released this exact product, the CFPB and state regulatory authorities would have a team sent in to shut the site down,” Councilman said.
CHLA and CMLA also are concerned at the lack of input from those in the industry who understand the nuances of mortgage lending.
“Secondly, we are concerned that this proposal was developed without real input from industry and other affected parties, and further that the rate surveys do not appear to include loans from community lenders. CFPB prides itself on transparency and collaboration with affected parties, and we would encourage that this standard be fully met with respect to initiatives such as this,” the letter states.
“Third, CFPB’s overarching emphasis on rate may send the misleading impression that a mortgage loan is merely a uniform commodity, and that the lowest interest rate is always the best one. In fact, there are other factors that come into play, including origination fees, discount points, and mortgage insurance. If consumers only pay attention to the rate, this could create incentives for loan originators to lower the rate and make up for this through other fees, which could overall be less advantageous to the borrower.”
Finally, the two industry groups say they are concerned that the roll-out of the Rate Tracker tool, including the broader “Owning a Home” CFPB initiative, may give the false impression to consumers that they do not already enjoy substantial protections to protect them in securing competitive mortgage rates and terms.
“In fact, there are many longstanding, as well as recently adopted provisions in place that provide disclosures, prohibit bad practices, and promote competition,” they say in their letter.