The CFPB was created in 2011 after its conception was included as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act, which passed as a response to the financial crisis of 2007–08 that played a significant role in creating the Great Recession and was signed into law by President Barack Obama.[3]”
From Wikipedia
Born out of our recent financial crisis this agency has an enormous role in the everyday lives of all of us consumers. Those of us in the mortgage industry have felt the impact of this new behemoth financial regulatory agency for a few years now. Yet I am constantly surprised by how few real estate agents, attorneys and just the regular people on the street are aware that this agency exists or what they do.
The mission of the CFPB is to regulate financial institutions from banks to debt collectors and payday lenders and to protect consumers from unscrupulous and unfair behavior on behalf of these institutions.
To date the mortgage industry has had new regulations that:
· Establish prohibitions on how we are compensated
· Determine how we manage the appraisal process
· How and when we communicate with consumers
· How mortgage servicers communicate with consumers
· How lenders disclose fees
· How lenders advertise to consumers
To name just a few of the changes we have experienced.
Beginning in 2014 we have to act in accordance with the CFPB’s new rules on what makes a “Qualified Mortgage” or QM and how we verify a consumer’s “Ability to Repay” or ATR.
Both of these rules could significantly impact our housing market. There are hard and tight rules on qualification guidelines. Documentation intensity and scrutiny will rise and some lenders will be afraid enough of the new rules that they will end up lending only to the absolutely top tier of borrowers or discontinue residential lending all together.
If you or someone you know is planning on buying a home in 2014 these new rules could affect how they qualify. If you or someone you know has been pre-approved for a home purchase, they should reach back out to their lender to insure that they will still be approved under the new and more restrictive guidelines. We don’t fully know the extent of the rules as they are still being promulgated as I write this.
The law that created the CFPB was 2000 pages before the rules were written. This is a massive agency with a huge mission. Much of the regulatory changes that have impacted our industry have helped our consumers and cleaned up the bad behavior in our industry. But all consumers need to be aware that this agency is out there to protect them… and to be aware where over protection may be getting in the way of their personal commerce.
If you don’t know about the CFPB or even if you do, you should learn more about them and their mission. Check them out here:
http://www.consumerfinance.
