Industry prays for clarity but expects no mercy from Chopra

Affordable housing advocates hope that enforcement, which dwindled under the Trump administration, will return to previous heights

Rohit Chopra

Affordable housing and consumer advocates hailed Rohit Chopra’s confirmation as Consumer Financial Protection Bureau director, but industry stakeholders hope the watchdog agency will not catch them off guard.

The mortgage industry widely expects the CFPB to increase enforcement under Chopra. It remains to be seen how aggressive that enforcement will be, but industry stakeholders hope the CFPB will understand how much has changed since the subprime lending crisis and post-recession reforms.

“Today’s mortgage market is the safest it has been in decades,” said Bob Broeksmit, president of the Mortgage Bankers Association. Broeksmit said the MBA hopes to work with Chopra to sustain that progress, and “provide clarity and consistency in the guidance given to lenders.”

Rather than issuing clear, predictable guidance, the mortgage industry fears the CFPB will pursue headline-grabbing, high-profile enforcement actions. Some, including ranking Senate Banking Committee member, Pennsylvania Republican Sen. Pat Toomey, have said the CFPB engages in regulation by enforcement.

Ahead of the Senate’s nomination vote, which split along party lines, Toomey said that Chopra’s nomination would return the agency to “the lawless, overreaching, highly politicized agency it was during the Obama administration.”

Toomey criticized the agency’s lack of accountability, although a 2020 Supreme Court decision allowed the director to be fired at-will by the President. Former CFPB Director Kathy Kraninger resigned at Biden’s request in the early days of his administration.

While most in the mortgage industry brace for lengthy investigations and heavy-handed enforcement, the Community Home Lenders Association has already asked the CFPB to turn its attention to what the trade association sees as a regulatory inequity.

The CHLA asked the CFPB, in a letter nominally congratulating Chopra, to make sure that all mortgage loan originators — including those at depository banks — have to comply with the same regulatory requirements of non-depositories.

Scott Olson, the group’s executive director, argued that exemptions for mortgage originators at banks from licensing, testing, independent background checks and continuing education requirements is incongruous with requirements of bank employees working in insurance or other financial sectors.

He also pointed to the Wells Fargo fake account scandal — for which regulators last month fined the bank $250 million — as evidence of the risk of inconsistent standards for loan originators across banks and non-banks.

“In the wake of the Wells Fargo account scandal, we now understand the serious consumer financial and personal harm that can result from employee-consumer interface behaviors that don’t meet minimal consumer protection standards,” said Olson. “The combination of unqualified bank mortgage loan originators, combined with senior bank management pressures on employees to push profitable mortgage products without regard to suitability, represents a clear consumer threat.”

The tone from organizations advocating for affordable housing was substantially brighter. Chopra is “the consumer watchdog our country needs,” proclaimed Graciela Aponte-Diaz, acting federal advocacy director at the Center for Responsible Lending, ahead of the nomination vote.

“He is up to the challenge of protecting people’s wallets from predatory practices, ranging from lending discrimination to COVID relief scams to abusive debt collection practices,” Aponte-Diaz said.

Jesse Van Tol, president of the National Community Reinvestment Coalition, pointed out that enforcement dwindled under the Trump administration and the CFPB gutted its fair lending office. The Government Accountability Office found that during a 2018 reorganization, the CFPB shifted its fair lending enforcement from specialists to generalists at the enforcement office.

“Chopra can restore the CFPB to its intended mission,” Van Tol said. “Under Chopra’s leadership the CFPB can get back to work strengthening the oversight of financial institutions and restore protections that were diminished or ignored under Trump.”

California Congresswoman Maxine Waters, a high-ranking Democrat and chair of the House Financial Services Committee, said she looked forward to working with Chopra “closely.”

“At a time when consumers need a strong watchdog, Mr. Chopra will be an advocate for working families,” Waters said.

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