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CFPB: What It Means to You



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By : David Reinholtz    99 or more times read
In the wake of the ongoing real estate recession, the federal government has introduced a variety of measures designed to protect consumers and weed out unprofessional or predatory mortgage loan originators. One of these actions has been the creation of a new federal agency, the Consumer Financial Protection Bureau (CFPB).

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) established the CFPB, which was launched in July 2011. Here’s the mission statement of the CFPB: “The central mission of the Consumer Financial Protection Bureau (CFPB) is to make markets for consumer financial products and services work for Americans – whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.”

The basic idea is to heighten government accountability by consolidating into one place a variety of responsibilities that had previously been scattered across various government entities. The CFPB is like a one-stop-shopping center for consumer financial affairs.

Let’s explore what this means to you, the mortgage lending professional, and to your clients. The CFPB’s activities cover three areas: to educate consumers; to enforce federal consumer finance laws; and to gather and analyze relevant information.


What the CFPB Can and Cannot Do

At this time, the CFPB only has the authority to enforce existing regulations that were previously under the control of other agencies. With one or two exceptions discussed below, there are no new CFPB-created laws or regulations that mortgage industry professionals need to learn about. There’s a political reason for this, which I’ll cover later in the article. The CFPB can only streamline existing functions and act as a clearinghouse for consumer complaints.


New Mortgage Disclosure Form

One program that directly impacts lenders is “Know Before You Owe.” This is a participatory effort that consumers and MLOs access through the CFPB’s website at consumerfinance.gov.

As required by federal law, consumers who apply for a mortgage loan receive two forms: a two-page Truth in Lending disclosure form and a three-page Good Faith Estimate. By informing consumers and allowing them to compare mortgage offers, the forms are supposed to help the consumer pick the mortgage product that’s best for them.

The two current forms have overlapping information and can be confusing to consumers. They also needlessly drive up costs and the regulatory burden on lenders. The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFRB, mandated that the CFRB combine these two forms into one.

To this end, during the summer of 2011 the CFPB posted on its website two different mortgage loans using the same draft version of a new, simpler disclosure form. Consumers and MLOs are invited to comment.

MLOs can click on the “switch to the industry tool” icon to be taken to the page that features two prototype loan documents for a typical $121,000 loan. The samples (called “Jasmine” and “Nandina”) can be downloaded as pdfs. The prototype forms you can review are designed to combine both the Good Faith Estimate and the initial Truth in Lending disclosure, as mandated by the Dodd-Frank Act. You are invited to review the two loan estimates and choose the loan that you would recommend to your clients.

The CFPB promises that they will post drafts throughout the process, and give consumers and MLOs a quick, simple way to offer opinions on what works and what doesn’t. In the end, the new unified disclosure form will have to work for the consumers and lenders who rely on it every day.


Consumer Mortgage Counseling

For consumers facing foreclosure, the CFPB offers a website portal that helps the consumer get connected to a HUD-approved housing counselor. At no cost to the borrower, the counselor can help them work with their mortgage company to try to avoid foreclosure. The housing counselor will help the borrower organize their finances, understand their mortgage options, and hopefully find a work-out solution that works for them.

HUD provides an online list of foreclosure prevention resources arranged by state. Military members or veterans can call or visit the Veteran Administration’s home loan website to get personalized assistance.

The CFPB encourages at-risk homeowners to call and report foreclosure prevention and loan modification scammers who promise “guaranteed” or “immediate” relief from foreclosure, and who might charge very high fees for little or no services.

For low-income consumers who think they may need legal advice, the CFPB provides a link to the website of the Legal Services Corporation. The LSC is an independent 501(c)(3) nonprofit corporation that promotes equal access to justice and provides grants for high-quality civil legal assistance to low-income Americans. The LSC website features a state-by-state directory of organizations offering consumer legal services.


Regulating Mortgage Loan Servicers

Consumer advocates assert that unscrupulous loan servicers do not keep accurate records of ownership payments and escrow accounts, and then falsify court documents to move foreclosures forward. The CFPB can require that companies who collect mortgage payments do not charge illegal fees or enroll a homeowner in overpriced insurance plans, keep accurate records of what the borrower owes, and do not either deliberately or accidentally push a homeowner into foreclosure.
David Reinholtz is a professional Mortgage expert in Real Estate Industry. David is also a sales and marketing expert and trains professionals in every career field. David has personally trained tens of thousands of loan officers, mortgage brokers, real estate agents and individuals through The Close More University Seminar Series, LoanOfficerSchool.com Classes, Correspondence and On Line Learning, and countless private engagements and training events throughout the country. David is the Founder and CEO of LoanOfficerSchool.com, an approved education provider for The Conference of State Bank Supervisors and The National Mortgage Licensing Systems' (NMLS) required pre-licensing education and continuing education.

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