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If you weren’t sure, you now know who wasn’t responsible for the financial crisis of 2008. According to Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), it wasn’t the Credit Unions. I guess it was those unscrupulous Independent Mortgage Bankers, the Mortgage Brokers and the Banks (of all sizes), along with their affiliates, that all contributed to the housing crash.
According to Mr. Cordray, in his remarks at the Credit Union National Association meeting on February 23, 2016, the Credit Unions were not the ones that underwrote bad loans that sank the housing market. That would indicate that it must have been those other financial institutions that originated all those bad mortgage loans during the period leading up to the crash.
As a result, changes were needed and CFPB rode to the rescue with new rules and regulations geared toward more protection and information for the consumer. From CFPB’s point of view, these changes have been fruitful and the naysayers have been proven wrong.
QM and ATR had no negative effects on lending or the housing markets and the TRID rules, once lenders get a little more experienced, will be a great benefit to consumers, lenders and the industry as a whole. Great job CFPB, if they do say so themselves.
But wait there’s more. On the heels of the recent TRID changes, come the new HMDA rules for the capture and analyzation of more data on mortgage originations. Again, according to Mr. Cordray, these changes and the collection of more loan data will serve both the public and lenders (please don’t do us any more favors) by providing more information about how lenders serve their markets. It will also provide better information to assist public officials in guiding their policy decisions and in detecting lending patterns that may be discriminatory. Ah, those untrustworthy mortgage lenders again.
If the Credit Unions were not at fault in contributing the housing calamity, then why can’t they be exempted from all these new rules? Sorry, no can do, says Mr. Cordray.
Congress said that all financial institutions must play by the rules, and CFPB was created to enforce them. CFPB has some leeway in determining what is applicable but they believe it was not Congress’s intent to exempt any financial institution from the rules.
Some institutions may be treated differently, with lesser requirements and scrutiny based on their size, but all should basically play by the same rules. So, CFPB is leveling the playing field, so to speak. Good for them.
What’s needed now is for the CFPB to continue this guidance and answer the questions raised by lenders and title agents relative to the recent TRID changes. They may have accepted the challenges of correcting the problems of the past but, in doing so, they are creating confusion and additional costs for lenders, and delays in service to their customers. Both the confusion and costs result in a higher cost to the consumer for a loan. Today that cost is somewhat offset by a low-interest rate environment. That may not last forever.
Whether you agree or disagree with Mr. Cordray, the new rules are here to stay. Lenders, with some additional guidance and answers from CFPB, must learn to work within the framework of the new regulations. No one wants to be blamed for another housing crash.
Hopefully, there won’t be one.
For Mr. Cordray’s complete speech to CUNA click HERE
