The reverse mortgage industry is heavily regulated—I get it. There is a fear of the unknown, and it’s difficult to get excited about a super-committee with unprecedented, broadly defined power that was created on partisan lines, headed by an appointee who was selected through a process designed to circumvent Congress, all of which is subject to constitutional challenge. That last sentence was a mouthful, but it’s a reality. Another reality? The CFPB is here to stay. While you are free to disagree with the process that created our new regulatory authority, it’s time for us to stop the attitude of resistance and get on board.
The rhetoric began quickly: “The CFPB is out to kill the mortgage industry!” “It is going to destroy small business!” Have we learned nothing from our recent history? Our little corner of the mortgage market has faced a turbulent last couple of years and if you’re reading this, you’re still standing. We survived counseling changes, principal limit “haircuts,” appraisal independence inspired by the Home Valuation Code of Conduct, increased monthly mortgage insurance premiums, detractors calling our program the next subprime, loan originator compensation changes, the departure of the big banks and on and on and on. All of these things were game changers to one degree or another. We absorbed all of them. In some cases, though we fought them tooth and nail, we saw improvements, opportunities and foundations that would strengthen our fragile industry. Who’s to say this is going to be any different?
Be honest—it’s not like we’re doing a perfect job on our own. T&I defaults, anyone? We’re still waiting for some guidance from HUD, any guidance, any day now. But this isn’t a HUD issue; it’s our issue as an industry. We know we need to fix it, and we’ve known we need to fix it for more than a decade. At the current rate, nothing is going to be done until it’s too late. But one thing you can say about what we’ve seen from the CFPB thus far is that it gets things done, and quickly. Once the Cordray appointment was made, the agency took off running. It is meeting seemingly impossible deadlines with time to spare. Maybe the CFPB can actually teach us a thing or two.
Anyone who was in the mortgage business prior to 2007 can attest to the mess the industry was in. If you missed that era, ask someone who was there; they’ll be happy to tell you. They’ll probably even have a wry smile on their face as they tell you. It was so bad it was twisted. It was ridiculous. It was corrupt. And I know the arguments: “They are trying to close the barn door after the cows have already escaped.” “These new rules are throwing the baby out with the bath water.” Clever clichés aside (and appreciated), the prior Wild West environment (see?) was not the answer. Safeguarding against future bad apples can hardly be seen as a negative. I, for one, like the new face of the mortgage industry. I like that it’s difficult to be successful. I like that a lot of the cowboys have left the industry. I like that mortgages are simpler and safer for consumers. And I’d like it to stay that way.
I’m not saying the creation of a super-committee with the level of control that was imparted to the CFPB is necessarily ideal, especially during these times of increased regulations. And I’m certainly not advocating its infallibility or granting credit before it’s due. Time will be the true test of that. But the mentality that the agency needs to leave us alone, the mentality that this is going to destroy us, needs to stop. The bureau has already shown the ability to act reasonably, and that is key. Few would argue that the reverse mortgage report it made to Congress was overly harsh. It wasn’t perfect—there were flaws, but overall it was fine. And maybe that’s what’s in store for us. The CFPB and its relationship with our industry may not be perfect, and there are likely to be flaws. But overall, we will be fine.