CFPB Director Nomination Hearing Scheduled for Next Week; Warren Leaving CFPB August 1

Next week the Senate Banking Committee will be holding a hearing on the nomination of former Ohio Attorney General Richard Cordray to be the first-ever Director of the Bureau of Consumer Financial Protection (CFPB).

Once a director is confirmed and voted on by the full Senate, the CFPB will officially become an independent agency within the Federal Reserve. Until then, the agency does not have some of the authority authorized by the Dodd-Frank Act, such as the ability to regulate non-bank financial institutions.

Effective August 1 Elizabeth Warren will be leaving her post as advisor to the Treasury Secretary for the Consumer Financial Protection Bureau (CFPB).

CFPB’s current associate director for research, markets and regulations Raj Date will run the day-to-day operations of the CFPB. Date is a former Wall Street executive previously with Capital One Financial Corp. and Deutsche Bank.

Warren, who has been in charge of setting up and establishing the CFPB and was often mentioned in Democratic circles as a potential nominee to formally head the agency, will return to her post at Harvard University.

Debt Ceiling Resolution Still in Question

Earlier this week, the House of Representative’s vote on a plan to increase the debt ceiling in exchange for nearly $1 trillion in budget cuts was delayed at the last moment due to lack of Republican support. As a result, House Speaker Boehner (R-OH) has been forced by conservative members of his party to significantly rewrite his plan.

The plan now being developed by Speaker Boehner would raise the borrowing authority of the United States for a short period of time, and would be contingent on Congress approving a balanced budget amendment to the U.S. Constitution. While details of the revised plan are limited, the modifications are expected swing the votes of many conservative Republicans opposed to the initial plan proposed by the Speaker.

In the Senate, Majority Leader Reid (D-NV) has a plan which would reduce federal deficits over the next decade by at least $2.2 trillion and would raise the debt ceiling by $2.7 trillion through the 2012 elections.

From the White House, President Obama has put his support behind Senator Reid, and has threatened to veto any plan which does not raise the debt ceiling for an extended period of time.

While the immediate effects of not raising the debt ceiling by August 2nd are unknown, without an increase in the debt limit, the federal government will eventually not be able to pay all of its bills unless some action is taken.

MHI Comments on “Ability to Repay” Proposed Rule

Last week, MHI submitted formal comments in response to proposed rules developed by the Federal Reserve Board implementing ability-to-repay requirements outlined in the Dodd-Frank Act.

Under the Act, creditors must verify a consumer’s ability to repay a loan prior to making a mortgage, including personal property loans on manufactured homes. Under safe harbor provisions in the Act, a lender can potentially satisfy these requirements by originating a “qualified mortgage,” which is a new definition outlined in the Act.

In addition to satisfying ability-to-repay requirements, those making “qualified mortgages” also potentially avoid being classified as a “higher risk mortgage,” which requires an appraisal of a dwelling (including manufactured homes) prior to closing on the home transaction.

To be a “qualified mortgage” the loan transaction must meet several guidelines, including: limits on points and fees; loan terms must not to exceed 30 years; it must meet yet-to-be-determined debt-to-income ratios; and must be a loan that fully amortizes.

MHI’s comments to the proposed rule focused on several areas, including:

• Treatment of manufactured home sellers: MHI urged the Board to clarify and reinforce its proposed rule that sellers of manufactured homes may assist consumers throughout the home buying process, including assisting them in applying for a residential mortgage loan without being considered loan originators for purposes of disclosures required under the Truth in Lending Act (TILA).

• Safe harbor for qualified mortgages: reinforce Congressional intent in the Act that lenders making qualified mortgages be provided a legal safe harbor from ability-to-repay requirements.

• Points and fees limitations on smaller loans: while the proposed rule does provide options for those making loans under $75,000 to exceed the three percentage points and fees cap outlined in the Act, MHI urges the Board to consider a third option of allowing creditors to charge the greater or three percent of $2,000 to allow lenders a greater ability to recoup fixed costs associated with loan origination, while still allowing for significant consumer protections.

CFPB to Release Third Round of Mortgage Disclosure Forms

The week of August 1, the Consumer Financial Protection Bureau (CFPB) will be releasing a third round of the combined mortgage disclosure forms for public feedback.

The CFPB has already solicited two rounds of feedback on the forms, required under the Dodd-Frank Act, combining disclosure required under the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA).

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