Here are five ways to improve the CFPB

By Jeff Lazerson

12/7/17

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.

Rate news summary

From Freddie Mac’s weekly survey: The 30-year fixed rate averaged 3.94 percent, 4 basis points more expensive than last week’s 3.90 percent. The 15-year fixed averaged 3.36, 6 basis points more expensive than last week’s 3.30 percent.

The Mortgage Bankers Association reported a 4.7 percent increase in loan application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $453,100 loan, last year’s rate of 4.13 percent and payment of $2,197 was $49 more than this week’s payment of $2,148.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at zero cost: A 15-year at 3.375 percent, a 30-year at 3.875 percent, a 15-year agency high-balance ($424,100 to $636,150) at 3.75 percent, a 30-year agency high-balance at 4.125 percent, a 15-year jumbo (over $636,150) at 4.25 percent and a 30-year jumbo at 4.375 percent.

What I think: After a five-year run as its first director of the Consumer Financial Protection Bureau, Richard Cordray recently quit to run for governor of Ohio.

Maybe President Trump can do as good a job picking the new CFPB director as he did picking Supreme Court Justice Neil Gorsuch. Consumers, the mortgage industry and the country deserve better.

Let me count the ways:

1. The bureau received at least $596.2 million in funding from the Federal Reserve in fiscal year 2016, according to Fed spokeswoman Palmer Osteen. It now has more than 1,600 employees. According to the Government Accountability Office, the CFPB collected an additional $182 million in fines in 2016. Yet, it allocated just under $131 million (about 72 percent) of that to victim compensation. Withholding about $51 million from victims. Disappointing for sure.
2. The message from the CFPB to the industry’s bad boys is as long as you have a large enough wallet, you are safe with us. Out of the thousands of mortgage companies and out of the hundreds of thousands of licensed mortgage loan originators, I could find no evidence that the CFPB ever suspended or revoked any license. “I’m not aware of any cases where a lender’s license was revoked,” said CFPB spokesman Samuel Gilford. Why not remove the more egregious players to prevent others from being victimized?
3. First-year individual mortgage loan originator education, testing, background checking and licensing runs about $1,105, according to Duane Gomer of Duane Gomer Education. This is in addition to the California Bureau of Real Estate’s education and licensing costs of approximately $700 for mortgage brokers, Gomer said. More affordable licensing would mean more loan officers competing for your business, driving down mortgage origination costs.
4. According to the Mortgage Bankers Association, compliance costs have increased $1,000 per file in the 2012 through 2015 timeline. The MBA cites its members’ difficulties with regulation by enforcement. It would rather have clear guidance on what the CFPB expects. Not only are these high compliance costs getting passed onto the consumer in loan pricing, but fearful lenders often take the attitude of, when in doubt, better to decline a loan than get busted by the CFPB for taking a chance.
5. Mortgage borrowers come in all financial shapes and sizes. One size does not fit all. There are many experienced loan underwriters out there who should be granted the autonomy to make prudent decisions (be it approval or denial). An underwriting engine from Fannie or Freddie should never be the final answer. Many a good borrower was denied just because the machine said so.

If you have questions or comments, please contact Jeff Lazerson by clicking here.