The Mortgage Bankers Association, the largest trade group in the mortgage finance space, weighed in on the Republican-led Financial CHOICE Act, H.R. 10.
The Financial Services Committee is currently marking up the act as it begins the process to replace the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Democrat and Republican committee members are already at war over of the details of the Financial CHOICE Act, with a lot of it centering on the future of the Consumer Financial Protection Bureau since it faces some of the most drastic changes.
The MBA decided to further add to the conversation on Monday and wrote a letter to House Financial Services Committee Chairman Jeb Hensarling, R-TX, giving the mortgage finance industry’s perspective.
And once again, the future of the CFPB is a main point of contention. This is on top of the bureau’s fate correspondingly being fought over in court in the landmark case between PHH and the CFPB.
“MBA supports many of the goals embodied in H.R. 10 and our comments will focus primarily on capital requirements, commercial/multifamily real estate, key changes to the structure of the Consumer Financial Protection Bureau — a centerpiece of the Dodd-Frank Wall Street Reform and Consumer Protection Act — as well as regulatory relief measures previously considered by the Financial Services Committee and incorporated into this new legislation,” the letter, which can be found here, stated.
While the letter focused on more than only the CFPB, it was a main topic in the MBA’s letter. Here is a break down of what the MBA thinks should happen to the CFPB.
“The Financial CHOICE Act proposes to fundamentally restructure the Consumer Financial Protection Bureau and renames it the Consumer Law Enforcement Agency. MBA continues to support the assignment of several consumer financial protection laws to a single agency such as the CFPB or the new CLEA,” the letter stated. “However, MBA also supports refinements of the Bureau’s makeup and authorities to better address consumer needs and otherwise carry out its responsibilities.”
A key area the MBA disagrees with, along with others, is the leadership structure of the CFPB.
“MBA is disappointed the new version of the Financial CHOICE Act retains a single director governance structure at the CLEA. We believe the governance of the current CFPB would be vastly improved if Congress replaced its single director with a bipartisan 5-member commission,” the letter stated.
For example, the MBA pointed at the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the Consumer Product Safety Commission as examples of this.
A commission structure assures judicious consideration of a range of viewpoints in carrying out regulatory functions with appropriate involvement of representatives of both parties and a range of interests including those of both consumers and industry.
Hensarling released an updated version of the Financial CHOICE act in April, with one of the key changes in the updated act being the CFPB’s leadership structure.
The original CHOICE Act replaced the director of the CFPB with a Consumer Financial Opportunity Commission, a bipartisan independent commission serving staggered terms.
Instead, in the newest version, the Consumer Financial Protection Bureau would be changed to the Consumer Financial Opportunity Agency, an executive agency with a sole director removable at will. The deputy director would also be appointed and removed by the president.
The MBA added that the original version of the Dodd-Frank Act also recommended a bipartisan commission.
Other key areas the MBA recommends improvements on includes:
- Requiring the Chairman to establish procedures that would require the agency to: (1) propose and finalize a “rule on rules” establishing the circumstances under which it will provide rules, interpretative opinions, bulletins, FAQs and other guidance; (2) establish procedures that require it to seek and respond to questions following the issuance of major rules; and (3) provide notice of any changes to prior legal interpretations at least 60 days prior to taking enforcement action. These steps would work to address the failure of the CFPB to provide needed guidance on new rules or interpretations it changes.
- Section 718 removes the provision giving deference to the bureau’s, and now the agency’s, interpretation of any provision of federal consumer financial law. MBA believes that if the CLEA is to enforce consumer laws it must be required to first provide authoritative guidance on its interpretations, particularly those that are novel, well prior to enforcement.
The MBA also highlighted areas where it does not support the Financial CHOICE act.
One of them includes the pay scale at the CFPB.
Section 723 transitions the CLEA to a General Schedule compensation scale. MBA believes it is important that the agency charged with overseeing complex financial institutions and products be able to attract talented staff including examination staff with the education and experience necessary to perform their functions. Notably, the staff of other financial regulatory agencies are on a separate and greater pay plan than the General Schedule.
Other key areas of the letter include regulatory relief and capital requirements, along with changes to commercial and multifamily real estate.
As a whole, the letter concluded, “MBA supports the introduction and consideration of the Financial CHOICE Act and looks forward to working closely with Chairman Hensarling, Ranking Member [Maxine] Waters, and all the members of the Financial Services Committee as this bill continues to advance through the legislative process.”