IT’S ALL ABOUT THE CFPB !
Because it seems that for the last eight months I live, eat, and dream them.
Did you know that your major and minor finances, your kids’ education, your car, your life, in fact, it could be that your whole world is being governed by this independently regulated government system? So this is the “CFPB issue”, or I can say that the “CFPB is an issue”.
Darn it, we are counting down! In less than one month our lending, escrow, title and real estate handling processes will go through drastic changes. October 3 is what I call “D-Day”. “D” as in Disclosures (new), “D” as in Damn (oops, did I say that).
For at least 6 months, if not more, after this date, we will be in turmoil as buy/sell, refinance transactions take on new process guidelines, timelines, and subsequently create new paperwork and new headaches added on to whatever was there already.
I did give a little background as to the what, who, where and when of the CFPB previously, but if you need a refresher, check my May, 2015 newsblog.
Let me just say that if someone has not heard of the Consumer Financial Protection Agency then perhaps that someone lives on the moon and has limited internet access. I am sure that even the (American) folks on the Space Station have heard of it.
As the CFPB has its finger in every single pie that deals with consumers and their finances, so its effect on the American public is far, wide, and deep. But it is the looming change on Oct 3rd that has me and my peers nervous.
We have been dragged screaming and yelling into this overhaul of the guidelines that we have lived under for almost 50 years – the Truth In Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) – and it ain’t pretty.
What is even worse is that although we knew it was coming down since 2012, some folks in the lending, real estate and escrow industry are still totally clueless! It is eleventh hour and you don’t know about this? How will you manage your transactions and help your clients if YOU DON’T KNOW THE REGS?
EDUCATING – CFPB STYLE: I will be the first to admit that the CFPB has done a decent job in trying to educate the world.
They have their videos and tutorials, which have been gathered into one place and which you can access here.
Not only do they have a tutorial for consumers on what to watch when they approach a lender to borrow money under the new regs – “Know Before You Owe”, they have even created one just to educate real estate agents, which can be found at this link.
They know how important the real estate agent will be in the whole scheme of things so they get their very own tutorial, how about that.
THE BIG STICK: The CFPB knows that they have a reputation for their “it’s my way or the highway” approach to issues, which many industries have found aggravating and frustrating.
It’s that big stick – their power of giving “Consent Orders” without any other regulatory agency supervisory requirement – that have lenders running scared.
Can you imagine what the Board and stockholders of PHH Mortgage felt when they were hit with a $109 million Consent Order for kickback violations?
This case is in Court now but the damage is done. It’s safe to say that their modus operandi is to throw down the big stick and hassle it in Court later.
PUBLIC RELATIONS aka SPIN: Based on the recent big news splashes I would say that this agency has employed a PR team to take their quest to the American people.
For better or worse:
- Richard Cordray, the Director of CFPB, takes his spiel to The Daily Show with Jon Stewart! See the video here. http://thedailyshow.cc.com/extended-interviews/g3y3e0/richard-cordray-extended-interview
- Another video posted on their website gives the viewer a story of how they were able to demand the return a $12,000 deposit that a Borrower lost in a transaction. http://www.consumerfinance.gov/everyone-has-a-story/navid-applying-for-a-mortgage-can-be-complicated/. I have to admit that the storyline led to some disbelief on my part, truthfully. I mean, how did the Borrower allow himself to be scammed like this? Is this Navid an actor hired for this video?
- And then there is the write up that the CFPB got on the Time Magazine! http://time.com/3995779/the-agency-thats-got-your-back/, which made me want to bring out the violins on one hand or cancel my subscription on the other.
If you read the stories and watch the videos you will come away with the impression that they indeed “Got Your Back”.
But at what cost?
Someone always pays. There is no free lunch. Regretfully, (and here I am climbing up on to my soap box) although the big Lenders (Wells Fargo, JPMorgan Chase, PHH Mortgage) have paid their share through their Consent Orders, on a daily basis, it will be the small business owner, the small lenders, credit unions, and smaller institutions which, as usual, will have to deal with those “unintended consequences” or “fall out” that happens when the government starts fooling around with efforts at making the public’s life better.
COMPLAINTS! Could life get even more interesting?
Of course it can! Take the “Complaint Tool” which is readily accessible on their website – www.consumerfinance.gov.
With a click of a link the consumers can vent their dissatisfaction or pour their anger and frustration du jour out against whichever particular company they have a beef with.
Whether the complaint is valid or one-sided does not matter. It is reviewed, researched and if just cause is found, the CFPB gets on the phone.
No one, absolutely no one wants to get that call because this is where those infamous Consent Orders start. Interested in what kind of complaints are being submitted?
Check them out here on their public complain database.
They have taken it one step further and put together a Monthly Complaint Report, a compilation of statistics on types of complaints, who it is directed at, where it is originating from, and so forth.
Click here for a quick glance at the August report.
See, in August the highlight is that complaints against credit reporting companies jumped sharply, although the largest share of complaints still belongs to debt collection. Apparently, many of us are not happy with Transunion, Experian and Equifax. Tsk, tsk.
E-CLOSINGS: These new regulations have not yet started and the CFPB is already on to their next project of “consumer empowerment” with …. e-closings, the aim of which is to use technology to sign and record loan and real estate transactions.
I will tell you right now that this will be a huge disaster in the making. I can see the headlines now: “Rampant fraud takes place as children e-sign for parents!” “Borrowers complain of less accountability and less information from Lenders at the signing computer!” and so forth.
According to this article, there are three words that the CFPB wants e-closings to achieve for the consumer: understanding, efficiency and empowerment. Unfortunately, my understanding of the way to achieve those 3 words may not match the CFPB’s.
A review of the CFPB analysis of the pilot program makes me question their methodology.
The list of participants does not name any settlement agent involved directly in the program.
In fact it participants noted that there was resistance from settlement agents in handling e-closings .
Unless there is a huge gap of differences between east and west, loan document e-signings are still carried out at settlement agent’s offices. So where is our representation and voice in this pilot program?
As a settlement agent on the front lines I can just see this scenario: “Let me just sit here at the computer and click these docs for my mom and dad; it’s too much for them to read and understand anyway…”
COST? WHAT COST?
By the time this newsblog goes out there will be only 23 days to October 3rd.
As I type this newsblog my escrow software is down for the next 12 hours so that new software can be installed that will enable us to process and issue the new forms required under the new regulations.
Here is one “unintended consequence”: Did the CFPB take into account the cost for the complete overwrite of our industries’ software systems to effectuate this change? Of course they did!
My industry has posted many, many comments repeatedly since 2012.
They must have felt that the cost to the small business is of no great matter if it is made for the greater good of the consumer. Perhaps then the consumer should not be surprised when escrow fees go up to take into account the monetary outlay we need to make for their benefit.
OH, THAT COST. Oh, and one more thing – the CFPB’s ability to generate income through their Consent Orders means that they have no need for Congressional oversight, particularly for the COST to renovate their headquarters.
Here they are, a building which they have leased for $150 million and for which they are spending up to $216 million, to update. Nice, right? I’m thinking of filing a complaint…
I look forward to giving you an updated report in our next issue in October.
I guess this is a good quote at this time:
“It is not the strongest of the species that survives, nor the most intelligent. It is the one that is the most adaptable to change.”