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Banking & Finance  July 15, 2011

Bankers, lenders concerned over CFPB rules

While a portion of the Dodd-Frank Wall Street Reform and Consumer Protection Act will celebrate a one-year anniversary this month, one bureau created by the controversial piece of legislation is just getting started.

The Consumer Financial Protection Bureau, slated to open July 21, is at the forefront of the minds of many in the mortgage industry across the country, and experts in Northern Colorado’s housing market are no exception.

The CFPB will work toward consumer awareness when considering financial products such as mortgages and credit cards, in hopes that more financial education will help prevent consumers from biting off more than they can chew, avoiding some of the issues that brought on the recession.

The new agency, to be funded by the fees banks nationwide pay to the Federal Reserve, is the product of a year’s worth of work by an implementation team headed by Elizabeth Warren, a former Harvard University professor and longtime Washington staffer, who specializes in the economics of middle-class families, according to her biography on the CFPB website, www.consumer

finance.gov.

The CFPB is to be led by a director appointed by the President of the United States and confirmed by the Senate, according to the Dodd-Frank legislation, but no director had been appointed by July 11. In the event that no director is in place when July 21 comes about, responsibility for the CFPB will fall upon Treasury Secretary Tim Geithner, who will likely leave the CFPB in the hands of Warren, according to a report by CNN Money.

While the CFPB, which pledges on its site to use a combination of education, enforcement and study to reach its goals of greater financial literacy and consumer awareness, could prove to be a useful resource for consumers, local banking professionals are wary of the bureau and its reach.

Slimmed-down mortgage docs

One of the biggest changes made by the CFPB is the slimming down of mortgage documents provided to consumers when it comes time to sign on the dotted line. The two forms given to consumers, the Truth in Lending disclosure form and the Good Faith Estimate, will be reduced to just two to three pages of condensed information to ease consumers’ comprehension of what they’re signing.

Julie Piepho, executive vice president of Cornerstone Mortgage and vice chair of the National Mortgage Bankers Association’s State Legislative and Regulatory Committee, said that while making sure that consumers know what they’re getting into is important, simply condensing information won’t guarantee that.

In fact, according to Piepho, condensing the paperwork will likely create a situation in which mortgage brokers end up having to provide their customers with additional information to ensure the consumer properly comprehends all the information.

The CFPB has requested the input of industry experts in the creation of the new documents, asking the Real Estate Services Providers Council Inc. to spread the word to its members that the documents were available for critique on the CFPB’s “Know Before You Owe” page.

The documents have already been through two rounds of review, the first of which generated over 13,000 comments after their release to mortgage experts on May 27. The deadline for the second round of comments was July 5. Experts will have the opportunity to comment during three remaining rounds.

Comments from the previous rounds are taken into consideration before a new set of documents is released.

New banking regs

Experts in the banking industry are also concerned about the implications of the new bureau, and most of the concern stems from uncertainty over what sorts of changes will be made and what new regulations will be formed.

According to Tim Powers, spokesman for the Colorado Bankers Association, banks are working as hard as possible to minimize the impact of Dodd-Frank on their customers and employees, but the implementation of the CFPB is a “huge unknown.”

“The CFPB could turn out to be either detrimental or have very little impact; we really don’t know at this point,” Powers said.

The banking industry is also concerned about overregulation that could result from the CFPB.

The regulations that have been created by various pieces of legislation since the recession began in 2008 are lawmakers’ and the Federal Deposit Insurance Corp.’s attempt to avoid the problems that caused the housing crisis in the first place. But according to Piepho, the mortgage industry had already begun to correct itself when regulations set in.

According to a summary of the Dodd-Frank Act provided by the U.S. Senate, the CFPB will have the “authority to examine and enforce regulations for banks and credit unions with assets of over $10 billion and all mortgage-related businesses.” Banks and credit unions with less than $10 billion in assets will be examined for consumer complaints by the “appropriate regulator.”

The summary also says that the CFPB will coordinate with other regulators when examining banks to “prevent undue regulatory burden.” The bureau will combine regulatory duties from seven different governmental agencies and 19 different federal statutes.

While a portion of the Dodd-Frank Wall Street Reform and Consumer Protection Act will celebrate a one-year anniversary this month, one bureau created by the controversial piece of legislation is just getting started.

The Consumer Financial Protection Bureau, slated to open July 21, is at the forefront of the minds of many in the mortgage industry across the country, and experts in Northern Colorado’s housing market are no exception.

The CFPB will work toward consumer awareness when considering financial products such as mortgages and credit cards, in hopes that more financial education will help prevent consumers from biting off more than they…

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