On October 2, 2012 the Federal Trade Commission’s staff submitted a comment to the CFPB on proposed disclosure forms designed to help consumers understand the features, costs, and risks of home mortgage loans. The comment is in response to a CFPB Notice of Proposed Rulemaking regarding disclosures consumers receive when they apply for and close on a mortgage loan.
It states that the disclosures developed by the CFPB will likely improve the information that consumers receive under current federal regulations; they are generally simpler and less technical, and should be easier to understand.
The comment encourages the CFPB to conduct controlled quantitative testing before finalizing a rule to help ensure that the proposed disclosures effectively convey key mortgage terms to consumers and are not misinterpreted or misunderstood. The comment notes that quantitative testing should focus on the actual performance of the disclosures in conveying the desired information to consumers, and include control groups that allow for valid comparisons to existing disclosures. In 2007, an FTC staff study found that then-existing mortgage disclosures failed to convey key mortgage costs and terms to many consumers, and that better disclosures could be created to help consumers make informed decisions about mortgage products.
The Commission vote approving the comment was 5-0.
Comments regarding the proposed amendments to 12 CFR §§ 1026.1(c) and 1026.4 must be received on or before September 7, 2012. For all other sections including proposed amendments, comments must be received on or before November 6, 2012.
You may submit comments, identified by Docket No. CFPB-2012-0028 or RIN 3170-AA19, by any of the following methods:
• Electronic: http://www.regulations.gov. Follow the instructions for submitting comments.
• Mail/Hand Delivery/Courier: Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700 G Street, NW, Washington, DC 20552.
Instructions: All submissions should include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking.
Because paper mail in the Washington, DC area and at the Bureau is subject to delay, commentators are encouraged to submit comments electronically. In general, all comments received will be posted without change to http://www.regulations.gov.
What the Consumer Financial Protection Bureau is looking for in its mortgage industry audits has been a question since the bureau took effect. As they start we are beginning to see hints of what will be part of the inspection process.
It has been just four months since the CFPB got its director, and along with him, the ability to examine non-banks, but it has begun to visit mortgage companies of all shapes and sizes as part of its examination practice. Most important, say those familiar with the exams: preparation.
Many mortgage lenders have never had this type of examination. It can be very intense and it is important that you understand what they want and what they are looking for.
Manned with plenty of enforcement staff, the CFPB is also making the rules, leaving little room for gray area. Lenders are left to walk a fine line between working with the agency to resolve potential issues while not opening themselves up for enforcement action if they are in the process of trying to maintain or improve compliance.
Another issue, sources close to the exams say is that there is often an enforcement lawyer present from the CFPB, with one assigned to each exam team. This has been confirmed by companies already dealing with an exam.
The CFPB is interested in looking at policies and procedures. Under that part of the exam, the agency will look at things like compliance management, customer complaint intake and response and anything that will indicate whether the company has procedures in place to manage compliance as well as the “culture” of compliance.
They’re looking at loan files, interviewing staff, looking at any complaints, even calling to interview complaining borrowers
It would benefit any institution to hire someone to help prepare for the CFPB exam by reviewing Policy & Procedures, doing a pre-audit and looking at Fair Lending practices.
The big issue currently on the table is fair lending. CFPB has purblished statements on this being a focal point and recently commenting on disparate impact.
Cognitive Options Group can help you prepare, contact us today.
Yesterday, President Obama took the bold political step of using a recess appointment to name Richard Cordray as the Director of the Consumer Financial Protection Bureau (CFPB), effective through the end of the U.S. Senate’s next full session (i.e., year end 2013).
The official announcement was made this afternoon at a campaign-style event in Cleveland, Ohio, a key presidential battleground state. Cordray’s appointment comes over significant objections from both House and Senate Republicans to the governance structure of the bureau. While not objecting to Cordray’s qualifications per se, Republican leaders had been using procedural measures (pro forma sessions) to prevent a recess appointment absent structural changes. Yesterday’s action promises to further exacerbate the political tensions between Democrats and Republicans.
Unless Cordray’s appointment is ultimately found to be unlawful and an injunction issued against the CFPB’s exercise of its new powers, the Bureau will now be able to implement its full range of authority under the Dodd-Frank Act, including the ability to regulate non-bank financial institutions and to issue rules dealing with unfair, deceptive, and abusive acts and practices. Without a Director, the CFPB was limited to using those powers inherited from existing banking regulators. A fully empowered CFPB presents a number of new challenges for our industry.
Although the Dodd-Frank law authorized the consumer agency to regulate the so-called nonbank financial companies, which previously had little supervision, the law was purposely written such that the bureau could not invoke its powers until it had a director. That can now be done.
The bureau had taken responsibility for existing regulations on consumer products at banks and thrifts, it was not able to write new regulations for banking products like mortgages and credit cards until it had a permanent leader.
Are you ready for what is coming? We can help with the new regulations, disclosures and audits. Contact COGNOPS today.