There is a brand new Federal bureau that will begin overseeing real estate mortgage loans on October 3, 2015. It will have an enormous impact on mortgage financing and the residential real estate industry. This new agency is totally autonomous and answers to no other Federal agency. The areas of responsibility of this new agency include:
- Writing rules, supervising lending companies and enforcing consumer financial protection laws
- Restricting unfair, deceptive or abusive acts and practices
- Taking consumer complaints
- Researching consumer behavior
- Promoting financial education for consumers
- Monitoring financial markets for new risks to consumers
- Enforcing laws that outlaw discrimination and other unfair treatment in consumer finance
The new organization was initially created in 2011 and was established with the watch care of Senator Elizabeth Warren (D-Mass). Here are ten areas where consumers and mortgage lenders will observe the oversight of the CFPB.
- Mortgage lenders will no longer be able to push consumers into a high priced mortgage loan. Heretofore lenders were allowed to direct borrowers toward high interest rate loans, even if they qualified for a lower cost mortgage loan.
- Now homeowners are less likely to find themselves in a foreclosure situation. In the past lenders sold home buyers “No Docs” mortgages and often did not require borrowers to show proof of income, assets or employment. The CFPB has clamped down on such irresponsible lending practices and now will require mortgage lenders to verify the borrower’s ability to repay the loan.
- For borrowers who become delinquent on their mortgage payments, loan servicers will have to try harder to help the consumer avoid foreclosure. In the past mortgage servicing companies often offered delinquent borrowers various options to avoid foreclosure. At the exact same time such loan servicers were simultaneously working to perfect their foreclosure. Under the CFPB’s new authority, loan servicers will face large civil penalties if they fail to provide consumers accurate mortgage records, and must promptly notify borrowers if their loan modification applications are incomplete.
- Borrowers can now get low cost services of a home loan counselor. Most mortgage lenders are now required by the CFPB to provide applicants with a list of free or low cost housing counselors who can inform borrowers of the possibility that they are being ripped off by their lender.
- Borrowers with high-cost mortgages can obtain an appraiser’s opinion. Lenders who sell high rate mortgage loans are now required by the CFPB to obtain an outside appraisal to determine the value of the home.
- Fly-by-night companies in the lending business will be scrutinized and held accountable. Part of the CFPB’s authority will be to oversee debt collectors, payday lenders, and other under-regulated financial institutions. Fines for malpractice can be severe.
- Customers scammed by credit card companies may receive refunds. In October 2013 the CFPB ordered three American Express subsidiaries to repay some 250,000 customers $85,000,000 for illegally charging fees to customers. These scam practices included misleading credit card offerings, age discrimination and excessive late fees. More recently the CFPB fined JP Morgan-Chase $309,000,000 for levying similar unfair penalty fees to their customers.
- Student loan lenders also face scrutiny. The CFPB will oversee private student loan servicing practices by big banks to ensure compliance with fair lending laws.
- Members of the US Armed Forces to get extra protection. Recently, the CFPB ordered US Bank and their partner Dealers Financial Services to refund $65,000,000 to service personnel who had been charged fees on automobile loans which were not disclosed up front to such military service personnel.
- Consumers can cry for help. The CFPB has a division dedicated to hearing customer complaints related to any practice the consumer considers unfair.
The CFPB has enormous power to police and oversee lending practices of almost every lending entity including real estate mortgage loans, auto loans, student loans and credit card loans. They define what malpractices are and have the power to levy huge fines to those who violate Fair Lending Laws.