January 21, 2013
Authored by: Barry Hester and Bryan Cave
One can’t fault the CFPB’s production level in the past two weeks. Since January 10, the Bureau has issued seven distinct final rules – the lion’s share of what it considers “a single, comprehensive undertaking” to implement Dodd-Frank mortgage reforms. By our count, this work includes over 3,100 pages of rulemaking text not to mention the press releases and the various summary materials and social media campaigns. Final rules were issued on the following:
As a reminder, we’ll provide an overview of these rules and a focused analysis of the Ability to Repay and Qualified Mortgage Rules during a free webinar on Tuesday, January 22, at 3 pm Eastern, and future webinars will unpack the rest of these new requirements. Still to come in 2013 are the Bureau’s final rules on TILA-RESPA disclosure integration.
A couple of themes dominate this wave of rules. First, it’s an understatement to say that Dodd-Frank and these Bureau regulations institutionalize the GSEs and tight prevailing credit standards. Is anyone surprised that these rules effectively kill no-doc and NINJA loans? The rules effectively draw a box around the only mortgage loans most creditors are willing to make now anyway. This convergence may limit the Fair Lending and CRA implications of the rules themselves, as there is less room than ever for discretion and exception. Other themes include the Bureau’s efforts to accommodate the realities of rural markets and smaller creditors and servicers as well as its sensible preference for loans held in portfolio (i.e., skin in the game).
On the other hand, the new Servicing standards are going to demand a high level of customer service and multi-party coordination. We attended both the Baltimore and Atlanta release parties (a.k.a. Field Hearings) for the biggest of these new rules (including Servicing). One take-home could not be missed: in the wake of the financial crisis, the Bureau continues to emerge as a sounding board for the distressed mortgage borrower and an advocate for consumer rights both real and imagined. Its public relations efforts this year on the mortgage front are undoubtedly going to lead to more complaints and more lawsuits against lenders.
The good news is that the Bureau can’t compete with your own relationship with your customer base. And the easiest complaints to resolve are those that are never filed. So to avoid paying for the sins of crisis-era lenders and practices that are now long gone, take a lesson from the CFPB and stay ahead this year on customer service and your institution’s brand. Reinforce the distinction between your organization and the abuses that gave rise to the Bureau, and you may actually benefit from its rules.