The Consumer Financial Protection Bureau (CFPB or Bureau) published its Fall Rulemaking Agenda in late 2019, giving the industry an advanced look at what regulatory activity to expect over the coming year.
REAL Trends reported in January on one item on the Bureau’s Fall Regulatory Agenda—a five-year assessment of the TILA-RESPA Integrated Disclosure Rule (TRID) that the Dodd-Frank Act required to be completed by October 3, 2020. In a separate Request for Information (RFI) on November 22, the CFPB asked for public comments on the TRID Rule’s effectiveness as it prepares its assessment report.
Below are other key items on the agenda that impact real estate financing.
Preparing for the End of the GSE Patch
High on the CFPB’s priority list are preparations for the expiration of the GSE Patch, a safe harbor under its Ability to Repay requirements for loans eligible for purchase by Fannie Mae or Freddie Mac. The Bureau announced in 2019 that it plans to let the Patch end as scheduled on January 10, 2021, or possibly after a short extension. If it does not amend the Ability to Repay rule before that date, GSE loans with debt-to-income (DTI) ratios of over 43% will not qualify for Qualified Mortgage status.
The CFPB asked for public comment on possible amendments to the rule over the summer and announced in its Fall Regulatory Agenda that it intends to issue a statement or proposal to address the GSE Patch in December 2019. Given that it missed that deadline, an announcement in early 2020 seems likely, and industry observers believe a rule could emerge as early as the spring.
Loan Originator Compensation Fixes
A new item on the Bureau’s regulatory agenda is a possible rulemaking to address 2018 public comments that its loan originator compensation requirements are too restrictive. It says it plans to examine whether it should permit adjustments to a loan originator’s compensation in connection with originating state housing finance authority loans to facilitate the origination of such loans, and allow creditors to decrease a loan originator’s compensation due to the originator’s error. It did not set a target date for the rulemaking.
Home Mortgage Disclosure Act (HMDA) Thresholds
The CFPB plans to issue a final rule in March 2020 concerning permanent HMDA thresholds for open-end credit lines and closed-end mortgage loans. The May 2019 proposed rule would have increased the volume threshold that triggers reporting of closed-end mortgage loans from at least 25 originated loans in each of the prior two calendar years to at least 50 originated loans in each of the previous two calendar years. The CPFB also solicited comments on an alternative threshold of 100 originated loans in each of the previous two calendar years.
PACE Financing Criteria
The Bureau says it soon will take next steps related to Property Assessed Clean Energy (PACE), which allows homeowners to finance energy-efficient home improvements (e.g., solar panels, water conservation projects, insulation, and new doors or windows) through special property tax assessments. These assessments are secured by a property tax lien taking priority over existing and future mortgages.
Because Truth in Lending Act requirements are inconsistent with current PACE loan origination practices, Congress passed a law in 2018 requiring the CFPB to amend its regulations to develop new criteria, taking into account the unique nature of PACE financing. The Bureau solicited public comments in 2019.
Equal Credit Opportunity Act (ECOA) and Disparate Impact
Unlike its 2018 Fall Regulatory Agenda, the CFPB made no mention of plans to re-examine ECOA requirements in light of a recent Supreme Court ruling that a plaintiff must show that the defendant’s practice or policy caused a statistical disparity when bringing a Fair Housing Act claim. The omission was noteworthy since a 2019 HUD proposal making it more difficult for plaintiffs to advance disparate impact claims were seen as an indicator that the Trump administration plans to roll back the Obama administration’s extensive use of the disparate impact theory in Fair Housing and ECOA enforcement. The CFPB did announce in April 2019 that it will be conducting symposiums on consumer protections in the financial services marketplace, one of which would explore the disparate impact and the ECOA.
Looking Beyond to 2021
When reviewing the CFPB’s Fall Regulatory Agenda, it’s important to keep in mind that its regulatory priorities significantly could change in 2021 if the U.S. Supreme Court rules this year that the Dodd-Frank Act provision allowing the President to remove its Director only “for cause” is unconstitutional. Such a ruling could allow a Democratic President, if elected in 2020, to remove CFPB Director Kathy Kraninger without cause.
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.
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