rebecca chase a dramatic review of the cfpb · • payday lenders • auto dealerships • large...
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Rebecca Chase
MGIC Regional Training Director
Presented ByRebecca Chase
MGIC Regional Training Director
A Dramatic Review of the CFPB
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F i n a n c i a l R e f o r mF i n a n c i a l R e f o r m
Source: Deutsche Bank July 2010
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R e s t r u c t u r e d O v e r s i g h tR e s t r u c t u r e d O v e r s i g h t
The Dodd-Frank Wall Street Reformand Consumer Protection ACT
Signed into law July 21, 2010
FederalInsurance
Office(FIO)
ConsumerFinance
ProtectionBureau (CFPB)
FinancialStability
OversightCouncil(FSOC)
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Closer Look at the CFPBCloser Look at the CFPB
The Dodd-Frank Act defines five objectives for the CFPB:
• to ensure that consumers have timely and understandable information tomake responsible decisions about financial transactions;
• to protect consumers from unfair, deceptive, or abusive acts or practices,and from discrimination;and from discrimination;
• to reduce outdated, unnecessary, or unduly burdensome regulations;
• to promote fair competition by consistent enforcement of the consumerprotection laws in the Bureau’s jurisdiction; and
• to encourage markets for consumer financial products and services thatoperate transparently and efficiently and to facilitate access andinnovation.Consumer Financial ProtectionConsumer Financial Protection
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Who the CFPB OverseesWho the CFPB Oversees
Jurisdiction over banks and non-banks, including:
• Payday Lenders
• Auto Dealerships• Auto Dealerships
• Large debt collectors
• Credit Reporting Firms
• Student lenders
• Servicers
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What the CFBP OverseesWhat the CFBP Oversees
Rulemaking Authority transferred from 7 other FederalAgencies
• The Consumer Leasing Act• The Consumer Leasing Act
• Electronic Fund Transfer Act
• ECOA- Equal Credit Opportunity Act
• FCRA-Fair Credit Reporting Act
• FDCPA-Fair Debt Collection Practices Act
• HMDA-Home Mortgage Disclosure Act
• RESPA-Real Estate Settlement Procedures Act
• SAFE ACT-Secure and Fair Enforcement Mortgage LicensingAct
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T h e C F P B ’s S t r u c t u r eT h e C F P B ’s S t r u c t u r eRichard Cordray
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M a i n D i v i s i o n sM a i n D i v i s i o n s
• Research, Markets & Regulations
• Supervision, Enforcement and Fair Lending &Equal OpportunityEqual Opportunity
• Consumer Education & Engagement
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A b o u t t h e C F P BA b o u t t h e C F P B
• Prior to the appointment of the director, Richard Cordray,the bureau was limited in rulemaking to banks with assetsless than $10B, and did not apply to non-bank.
• With the appointment of the new director the CFPB nowhas oversight of banks with greater than $10 billion inassets and non-banks.
• The CFPB operating budget is 12 % of the Federal Reserve’sannual operating expense. This year they have a budget of$548 million
• For the next year, their focus will be on mortgage reformdue to a statutory deadline of January 2013
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C F P B ’s A g e n d aC F P B ’s A g e n d a
Finalizing proposed rules:
– Ability to Pay
– Loan Officer Compensation
– Qualified Mortgage (QM)– Qualified Mortgage (QM)
– Qualified Residential Mortgage (QRM)
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A b i l i t y t o P a yA b i l i t y t o P a y
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K n ow B e f o r e Yo u O w eK n ow B e f o r e Yo u O w e
• Dodd-Frank requires within one year aftertransfer date or July 21, 2012, CFPB mustpropose combined and integrated RESPA/TILAdisclosuredisclosure
• Loan estimate combining the GFE and earlyTILA disclosure has been developed throughiterative comment process
• Nine rounds of loan estimate prototypes forcomment ahead of proposed rule
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F i n a l P r o p o s e dF i n a l P r o p o s e dL o a n E s t i m a t e Fo r mL o a n E s t i m a t e Fo r m
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F i n a l P r o p o s e dF i n a l P r o p o s e dS e t t l e m e n t D i s c l o s u r eS e t t l e m e n t D i s c l o s u r e
Fo r u mFo r u m
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Q u a l i f y i n g M o r t g a g e ( Q M )Q u a l i f y i n g M o r t g a g e ( Q M )
• Proposed rule published early 2011, revising Reg Z– Requires creditors to determine consumer’s ability to repay
– Establishes minimum underwriting standards and restricts loan types
– Limits prepayment penalties
– Imposes record retention requirement
– Asks questions regarding optional implementations of rule– Asks questions regarding optional implementations of rule
• Statutory definition of criteria, Safe Harbor
• Statutory definition plus additional ability-to-pay requirements, RebuttablePresumption
• Non-QM loans generally expected to be equivalentto unsecured lending
• CFPB is now responsible for final rule– Comment period reopen and extended to July 9th, 2012
– QM rule expected to be released for comment on or about election day November 2012
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S i g n i f i c a n t L i a b i l i t y f o rS i g n i f i c a n t L i a b i l i t y f o rF a i l i n g t o M e e t A b i l i t y t oF a i l i n g t o M e e t A b i l i t y t o
R e p ayR e p aySec. 1413 – Allows consumer to assert violation of
ability to repay by creditor in foreclosure action by
creditor, assignee or other mortgage holder
Also under TILA - Mortgage creditor who fails to
comply with the ability to repay requirements may be
liable for (1) actual damages; (2) statutory damages (3)
up to three years of finance charges; and (4) court
costs and reasonable attorneys’ fees
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R i s k R e t e n t i o n /R i s k R e t e n t i o n /Q u a l i f i e d R e s i d e n t i a lQ u a l i f i e d R e s i d e n t i a l
M o r t g a g eM o r t g a g e• Proposed rule published early 2011
– Loans higher than 80 LTV are not QRM and require retention
– FHA\VA loans are exempt
– Asks for comment on a number of issues:
• Alternative QRM definition – loans up to 90 LTV with MI (or alternatives)
• Demonstrating that MI reduces the risk of default• Demonstrating that MI reduces the risk of default
• MGIC and MICA formally responded July 2011
• Broad support against proposed rule
• Regulators next move is unknown– Widely expected to be another proposal later this year
– Secretary Donovan has suggested a 10% down payment
– Is dependent on the QM definition
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Q R M P r o p o s a lQ R M P r o p o s a l
35%
30%
25%
20%
Percent of all Mortgages that Would Have Met all Requirements under the Proposed QRM Standard, by Year of Origination
20.4%
23.3%
19.5% 19.4%
22.4%
24.6%
30.5%
More than 80 Percent of GSE Business 1997–2009 Would Not Have Been QRM
20%
15%
10%
5%
0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source:FHFA. “Mortgage Market Note 11-02: Quali ed Residential Mortgages.” April 11, 2011.
17.0%
14.4%
11.5%10.7%
17.4%16.4%
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O t h e r M o r t g a g e R e l a t e dO t h e r M o r t g a g e R e l a t e dP r i o r i t i e sP r i o r i t i e s
• Loan originator compensation and anti-steering rules
• Data reporting requirements
• Restrictions on high-cost loans
• Other servicing practices
• Part of interagency process to consider:– Mortgage servicing standards– Various regulations concerning appraisals
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I n C o n c l u s i o nI n C o n c l u s i o n
• Reform isn’t easy or quick
• CFPB is having a direct effect on you
• Proposed & forthcoming reforms• Proposed & forthcoming reformspromise more change
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Questions
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Questions
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T h a n k yo u f o rT h a n k yo u f o rs u p p o r t i n g yo u r l o c a ls u p p o r t i n g yo u r l o c a l
M B A c h a p t e r !M B A c h a p t e r !
Suzanne LaCariaMGIC Senior Account ManagerPhone: 561.271.4436Email: [email protected]