CFPB’s Chopra addresses mortgage issues in House oversight hearing

Rohit Chopra addressed current mortgage issues under questioning from lawmakers including affordability and “zombie” mortgages

The Consumer Financial Protection Bureau (CFPB) wants to address mortgage issues, including affordability and servicing challenges. However, persistently high mortgage rates currently straining affordability prospects will limit what the Bureau can accomplish.

This is according to CFPB Director Rohit Chopra, who offered a semi-annual report on the CFPB in front of the U.S. House of Representatives Financial Services Committee on Wednesday.

“Residential mortgage activity has declined precipitously during the last few years, while interest rates, fees, discount points, and other costs have increased,” Chopra said when offering prepared remarks. “The result is that homebuyers are paying much more: average monthly payments on 30-year fixed rate loans increased by more than 46 percent from 2021 to 2022.”

The CFPB identified high mortgage rates as a driver of these trends, and is looking for ways to reduce costs for mortgage borrowers, Chora explained.

“The CFPB is examining ways to facilitate more refinancing activity if and when prevailing mortgage interest rates subside to ensure that borrowers who experience financial distress can navigate alternatives to foreclosure and to streamline rules and procedures for servicers to offer loan modifications,” he said.

Chopra also addressed new small business lending rules proposed by the Bureau earlier this year, crediting its previous actions in the mortgage arena with the creation of new small business lending rules.

“So many entrepreneurs struggle to get loans,” he said. “[We must] make sure we have a small business loan market free of discriminatory practices, it’s so important. We have done this in mortgage, and I think Congress has told the CFPB, ‘let’s do this in small business.’”

Rep. Brittany Pettersen (D-Colorado) also asked about another prior CFPB target known as “zombie mortgages,” which come from debt collectors seeking to foreclose on homes with mortgages past the statute of limitations.

“We think this is quite targeted in a few metro areas, but maybe nationwide,” he said. “[They include] second mortgages that were considered satisfied, but that have re-emerged, and are targeting people sitting on home equity, often seniors.”

“Zombie” debt continues to be an issue for consumers in multiple areas. People who are impacted by it find themselves needing to prove that the debt (even if it’s old) has been paid, Chopra said.

“I think there’s a lot of ways in which the credit report, too, is used to coerce people into paying this debt,” he said. “So, we do use our authority under the Fair Debt Collection Practices Act and Fair Credit Reporting Act, but I think it’s worthwhile to think if we need any sort of enhancements to it in order to make sure that this type of — what I see often as fraud — doesn’t recur.”

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