Helping to prevent another foreclosure crisis will be a top priority for President Joe Biden’s nominee for Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, according to his statements at his March 2 Senate confirmation hearing.
Chopra also forewarned the senators of escalated enforcement activity with more consumer restitution during his term, especially in the area of fair lending.
Chopra helped now-Senator Elizabeth Warren set up the Bureau in 2010, and then served as its student loan ombudsman and as an assistant director under former Director Richard Cordray. He currently serves in one of the Democratic spots on the Federal Trade Commission.
Here are some of the highlights from his hearing.
A “looming” foreclosure crisis
Chopra warned of a potential foreclosure crisis in the country, particularly in the housing market, as the eviction moratoriums and forbearance periods offered during the COVID-19 pandemic expire. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, as well as guidance from Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA) have prohibited lenders and servicers of government-sponsored enterprises (GSEs) and federally backed loans from beginning foreclosures through June 2021.
A CFPB report published on March 1 stated that in 2020, the number of homeowners who have fallen behind on their mortgage by at least three months increased by 250% to more than 2 million households, and is now at a level not seen since the height of the 2010 Great Recession. Collectively, these households are estimated to owe almost $90 billion in deferred principal, interest, taxes and insurance payments.
“My intuition is we have to be ready for potentially looming problems when it comes to forbearances that might flip to foreclosures,” Chopra said. He said that he will direct the CFPB to closely monitor mortgage servicers, and will deal severely with servicers who mislead homeowners about repayment options after forbearances expire in the hopes of avoiding a foreclosure crisis.
Chopra’s responses to the senators’ questions reinforced expectations that the CFPB will significantly ramp up its enforcement activities under his leadership. He said that consumer restitution will be the focus of his enforcement efforts, particularly when the alleged violator is a large company. “Restitution is a critical part of the enforcement work in order to make victims whole, as Congress intended,” he said.
During the Obama years, the CFPB returned approximately $12 billion dollars to consumers who allegedly had been victims of financial firms.
In response to concerns by Republican senators that he will return to Cordray’s “regulation by enforcement” approach, under which consent orders and administrative rulings set new compliance standards without notice, Chopra committed to bringing more transparency to the enforcement process through rulemaking, guidance and warnings.
A focus on fair lending enforcement
Chopra made clear that fair lending enforcement will be a focus of the CFPB under his leadership, saying that there needs to be “fair and effective oversight” in the mortgage market to “address the systematic inequities faced by families of color.” The CFPB likely will look into the algorithms that lenders use to make credit and advertising decisions, he said.
To accomplish his enforcement goals, he is likely to restore the CFPB’s Office of Fair Lending and Equal Opportunity to its Cordray-era position within the Bureau. The Office of Fair Lending and Equal Opportunity should play a “critical role” in its enforcement of the Equal Credit Opportunity Act (ECOA), he said. Former acting Director Mick Mulvaney had moved the office from the Bureau’s enforcement unit to the director’s office.
No views yet on the Qualified Mortgage rule
When asked about his views on what, if any, changes need to be made to the Qualified Mortgage (QM) rule, Chopra gave no substantive response, indicating that he needs to be brought up to speed on the issue. “I have a completely open mind about this, and I look to what the statute says and what really Congress’ goals are,” he said.
Based on his confirmation hearing, Chopra appears to face an easy road to confirmation, with a full Senate vote expected in April. He will serve a five-year term if confirmed, although the sitting president can fire him at will, pursuant to a 2020 U.S. Supreme Court ruling.
Sue Johnson is the former executive director of RESPRO, the Real Estate Services Providers Council Inc. She retired in 2015 and is now a strategic alliance consultant.