George Souto has written another great post. This time on the continued problems that the Consumer Financial Protection Bureau is suggesting. One thing he doesn't mention in his comments, is that many lenders are already charging higher rates for those who have lower loan amounts (some the cut off is $100k, for others it is any loans under $150k).
He also didn't mention that they are in the process of trying to fulfill a Congressional mandate to consolidate the GFE and TIL - and they may be trying to toss the HUD-1 into it as well.
Sorry, I know it is not nice to say stupid, but there seems to be a lot of stupid going on with the Consumer Financial Protection Bureau (CFPB). They are making it very obvious that Stupid Is, As Stupid Does, And There Is No Fixing It.
If anyone had any doubt whether or not the Consumer Financial Protection Bureau (CFPB) had a clue of how the Mortgage Industry operates, and the Loan Originator Licensing process work, the latest proposals by the CFPB should make it clear that they don't.
The Consumer Financial Protection Bureau (CFPB) rolled out a couple of new proposals last week, as well as reviving a couple of their past brilliant ideas. The intent of these proposals is to protect Borrowers from the evil empire made up of Lenders, Brokers, and Loan Originators. The latest brainstorm over at the CFPB on how to go about doing that would be to:
- Create new rules requiring Background Checks for Mortgage Loan Originators
- Prohibiting Loan Originators from steering borrowers to higher-priced products
- Lender discounts to pay for Mortgage Origination Costs
- Loan Originators to be paid one flat fee on loans no matter the loan size. Sounds good right?
Let's look at these brilliant proposals one by one, because the CFPB is a day late, and a dollar short on a couple of them.
Create new rules requiring background checks for Mortgage Loan Originators: This first one is a good representation of what the CFPB seems to do best, duplicate what already exists. Once Loan Originators were required to become licensed in 2010, an independent extensive Background Check that is done by each State's Banking Commission, and includes finger printing, and a credit pull became part of the Licensing Process. As a result of the State Banking Commission Background Check process, a number of prospective Loan Originators were denied a license. I know this to be a fact, because since this process was put into place we had three Loan Originators that we were considering hiring, that were denied a license because of what was discovered during the Background Check. So if we already have a procedure that is working, why do we need the CFPB proposing the same thing that is already in place. Is it possible that the CFPB has not taken the time to checkout what is already exists, and how it is working, before coming up with what they propose?
Prohibiting Loan Originators from steering borrowers to higher-priced products: The number of Lenders doing residential mortgages has been greatly reduced in recent years, making the Lending Industry a very competitive one between the remaining Lenders. Also most Borrowers shop around these day, or are very aware of what the local interest rates are. If a Lender, Broker, or Loan Originator tried to put a Borrower into a high-priced loan product the questions would start to fly, especially from the Realtor working with them. Having said that, the need for this proposal assumes that there are high-priced loan product still around. Subprime Loans are basically gone, and there are obvious reasons why Hard Money Lenders are still around. I would really like the CFPB or anyone else for that matter to point out what these high-priced loans are that Brokers and Loan Originators are putting Borrowers into. The CFPB needs to stop talking in general terms, and provide proof to back up the accusations that they are making. It is easy to make accusations, but where are the facts to back them up?
Lender discounts to pay for Mortgage Origination Costs: OK, I will keep this one short and simple. In one breath in the prior proposal, the CFPB wants Lenders to keep interest rates down, and protect Borrowers from high-priced loans. But in the next breath they are encouraging higher interest rates so that money can be given to cover the origination fees. Something just does not make any sense here.
Loan Originators to be paid one flat fee on loans no matter the loan size if the loan. Sounds good right? Since most of the members here on ActiveRain are Realtors, let me ask this, how would Realtors like to be paid one flat fee regardless of the Selling Price of the house? This is what is being proposed for Brokers and Loan Originators. I would like someone to explain to me how this protects Borrowers, especially Lower Income Borrowers. In order to establish a flat fee, an average amount would have to be determined that takes into consideration both smaller and larger loans. To keep things simple lets say that is $1,000 per loan. Now let's see how fair that is:
A Borrower purchasing a house for $100,000 pays $1,000 which is 1% of the sales price. A Borrower purchasing a $500,000 pays $1,000 which is .02%.
I don't know about you but it seems to me like the smaller loan amount is subsidizing the larger loan amount. The Buyer that can afford the least, is subsidizing the Buyer that can afford the most. May be it is just me, but there seems to be something wrong with that concept. Also I ask you if this brilliant idea is being proposed for Brokers and Loan Originators, how long before the same guideline is imposed on Realtors?
These proposals are what happens when decisions are based on assumptions, and not facts. The assumption is that Lenders, Brokers, and Loan Originators are all out there trying to take advantage of defenseless Buyers/Borrowers. Realtors deal with Lenders, Brokers, and Loan Originators everyday, are you seeing what the CFPB is accusing Lenders, Brokers, and Loan Originators of? If the answer to that question is not no, then please give me an example of an experience that you have personally had. Not something that you have heard, but an example of what you personally experienced in one of your transactions.
I thought that we lived in a country that one was presumed innocent until proven guilty, but it seems that the CFPB is presuming guilt without proof of guilt. When proposals are proposed, and decisions made based on assumptions, the end result is stupid proposals, and stupid decisions that make it obvious that Stupid Is, As Stupid Does, And There Is No Fixing It.
Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or email@example.com