Consumer Financial Protection Bureau; CFPB

The Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau, (CFPB), one of the most powerful agencies in US history. Ironically, though Congress created them, they don’t answer to Congress. They answer to the Federal Reserve, or themselves. They are funded by the fines they create, which is a frightening standard, especially for the consumer who ultimately pays the fines.

The CFPB has the authority walk into any financial institution both small and large and regulate, supervise, enforce, fine exorbitant amounts of monies, subpoena and or educate.  A recent visit  to one of the larger lenders for the first time to see if every document in every files adhered to the exacting new standards.  The conservative lender thought they had done an excellent job of compliance due to the regimented oversight and exacting standards given to each of their employees. After a dozen regulators spent 10 weeks in their offices, amazingly they were only fined Two Million ($2,000,000.00) dollars. Hurray the CEO exclaimed, we can stay in business.  With joy and pride he announced to his staff that we would still be in business for another year. Also commenting that those dozen regulators would next go to smaller broker shops without the same resources and they would probably be out of business.

As a loan officer I’m appalled that small to mid-sized business owners will be put out of business by mega fines simply because they won’t have the resources to stay in business.  These fines aren’t necessarily  because any consumers have complained or been wronged. It is because Dodd-Frank has completely changed the way loans have been originated for the past 30 years.   One of the fines was due to an email inadvertently left off of a Good Faith Estimate.  I’ll bet the borrower had the Loan Officers business card and 10 other documents with the email address. That however, was irrelevant to the CFPB.   

The mortgage industry was turned upside down over the past few years and over 50 % of the loan officers working for independent lenders lost their careers because they couldn’t pass the tests. These are human beings that have worked in an industry for 10 to 27 years.  They didn’t have management or loan processing positions which would be a huge asset for many of the questions asked.   Oh yes, I forgot to mention, bank employees don’t need to take or pass the test. While some Loan officers landed jobs at Banks, the 50% figure counts those in bank positions.

But who is really paying for these fines? The consumer of course, lenders play with the fees and margins  daily gaining additional yield spread from consumers to keep big government thriving.  Because only large lenders can afford the fines and fees soon, we no longer have mortgage brokers competing for our business with lower fees and rates.

 If I were to refinance my home with a large bank right now as compared to a local correspondent lender/broker, I would pay a rate .75 pts higher. Neither would I have an independent person willing to meet me at my home after work or on the weekends. Someone I would have unlimited access.  I do want to be protected by another branch of government or approve of a consumer financial protection bureau's lack of oversight by the consitiutionally guaranteed oversight of congress, the supreme court or the president.