Lenders, especially those dealing with HMDA reportable loans, face an uncertain regulatory landscape due to the recent shake-up at the Consumer Financial Protection Bureau (CFPB). To navigate this period, Premier Insights encourages clients to stay informed and proactive. Drawing on insights from the October Research webinar, “CFPB’s Shake-Up & It’s Impact on You” and from our 30 years of experience dealing with regulatory matters, this post outlines potential effects and action items.
Uncertainty and Communication
The webinar’s presenters, including Rich Horn, co-managing partner at Garrison Horn LLP and former senior counsel at the CFPB, and David Friend, owner of Friend Mortgage Consulting and a former employee of the Department of Housing and Urban Development (HUD) and the CFPB, highlighted the difficulty in predicting the future of the CFPB given the conflicting messages emerging from different sources. Horn noted that the stop work order is currently in place, preventing CFPB staff from performing their duties. This order could lead to delays in communication and responses to regulatory inquiries.
HMDA and Other Reporting
Despite the uncertainty, Friend stated that there have been no changes announced regarding HMDA reporting. Premier Insights advises lenders to continue submitting HMDA data as usual. Further, Horn advised that lenders are still obligated to comply with TRID and other applicable rules, such as ATR/QM, RESPA, FCRA, and ECOA. Non-compliance carries the risk of lawsuits from borrowers or enforcement actions from state agencies.
APOR and Core Functions
Clear regulatory guidelines are crucial for the industry to function, and the publication of the Average Prime Offering Rate (APOR) is one such function. Horn reported that Acting Director Vote directed the office of research to continue publishing APOR, signaling the importance of this metric. This is a telling indication that, despite the stop work order, not all functions of the CFPB are fully halted.
Consumer Complaint Process
The CFPB’s consumer complaint function has been a valuable resource for consumers and banks alike. Horn explained that a shutdown of the CFPB could mean that consumer complaints are not reviewed or addressed, potentially harming consumers. Friend added that many companies have found these inquiries beneficial for identifying and resolving issues.
Data Security
There are concerns regarding data security and access to CFPB data, especially with the cancellation of vendor contracts. Friend noted that safeguards are in place to protect supervisory data, including training and potential liability for data leaks.
Increased Enforcement, But Outside the CFPB
With the CFPB’s future uncertain, Horn and Friend suggested that private litigation, state attorneys general, and other financial regulators may increase their enforcement activity. Horn specifically mentioned the possibility of aggressive state enforcement in areas like loan originator (LO) compensation and RESPA.
Five Action Items for Lenders
Given the situation and these potential effects, Premier Insights recommends that lenders take the following steps:
- Remember that the CFPB is not Dodd-Frank or vice-versa: While a broad statement, it’s important to remember that the CFPB was mandated and given direction by Dodd-Frank. A stop work order at the CFPB does not impact the underlying statutes and regulations.
- Maintain Compliance Procedures: Continue adhering to established compliance procedures. The HMDA filing website, for example, is still online, and the deadline for 2024 data submission remains March 3, 2025.
- Monitor State Enforcement: Pay close attention to state-level enforcement actions, as state agencies and attorneys general may increase their activity (and by some indications already have been).
- Communicate with Trade Groups: Work with trade groups to voice concerns and suggestions for regulatory reform.
- Stay Informed: Monitor for updates from the CFPB or other regulatory bodies regarding HMDA reporting and other compliance matters.
By staying informed and proactive, Premier Insights clients can navigate the uncertainty surrounding the CFPB and mitigate potential risks to their lending operations.
