The most “feared man in mortgage” put in his two weeks’ notice on November 15: Consumer Finance Protection Bureau (CFPB) Director, Richard Cordray, issued a memo to staff, alerting them he will be stepping down from his position before the end of this month. Lauded by Democrats and criticized by Republicans, Cordray has a controversial record as the CFPB’s first czar. The Mortgage Bankers Association (MBA) put the frustrations of much of the industry in writing in a white paper prepared by their counsel, Covington & Burling LLP:
“The Dodd-Frank Act instructed the Bureau to establish far-reaching regulations; however, no industry has seen the Bureau in action more frequently or closely than the mortgage industry. The combination of aggressive enforcement and the absence of regulatory guidance evolved into a regime of ‘regulation by enforcement.’ Rather than seeking to provide the equivalent of ‘detailed guidance’ through enforcement, the Bureau should simply provide detailed guidance.”
The CFPB Director is appointed by the President and confirmed by the Senate. Politicians have various motivations for supporting the Cordray regime or jumping on the bandwagon to oust him and overhaul the agency. However, the mortgage industry has struggled as a result of the CFPB’s hesitance to issue advance notice of how mandates, such as the TILA-RESPA Integrated Disclosure (TRID) rule, should be applied in actual business practice. This left companies confused and consumers frustrated when the law took effect. U.S. Chamber of Commerce President and CEO, David Hirschmann, agrees with the MBA on the lack of guidance:
“Too often, the CFPB adopted a ‘keep them guessing’ approach to regulation and supervision, and the unnecessary uncertainty has left consumers with less access to the products they need. With the arrival of a new director, we hope the CFPB can turn a page and focus on promoting consumer choice, innovation, and clear rules.”
Whether you agree with Senator Elizabeth Warren that departing Director Cordray is a “dedicated public servant [and] tireless watchdog for U.S. consumers” or Congressman Jeb Hensarling who describes the Bureau’s first director’s leadership as “structurally unconstitutional and completely unaccountable to the American people,” Cordray’s departure creates an opening for change.
Consumer Bankers Association President, Richard Hunt, takes a more moderate view and expressed hope that the CFPB can be led by a bipartisan commission going forward, rather than consolidating power into a single, presidentially-appointed position, saying, “Congress should use this vacancy as an opportunity [to] uphold the Bureau’s important mission of consumer protection for the long-term. A Commission will establish transparency and bring a diversity of thought [that will] ensure rules are beneficial to consumers and the economy.”
Though President Trump declined to hasten Cordray’s departure by firing him, members of his administration have indicated they support CFPB reform. Speaking at MBA’s annual convention last month, U.S. Housing and Urban Development (HUD) Secretary, Ben Carson, told attendees he believed that lenders who make “innocent errors” should not face the same draconian regulatory consequences imposed on lenders who commit intentional fraud.
Even so, once government gains ground in areas such as taxation and regulation, it rarely recedes to previous boundaries: The mortgage industry shouldn’t expect widespread unraveling of rules that govern disclosures, audits or how they market to consumers upon Cordray’s exit. In light of the recent repeal of the Bureau’s forced arbitration rule, a reasonable hope is that the mortgage industry will have better guidance from the federal overseer without what has been perceived as overzealous, heavy-handed enforcement that seems to put headlines ahead of consumer protection.