CFPB Eager to Write New Servicer Rules

In ""testimony"":http://financialservices.house.gov/UploadedFiles/070711date.pdf before the ""House Financial Services Committee"":http://financialservices.house.gov/ and two adjoining subcommittees, ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/ (CFPB) associate director and potential nominee Raj Date made it clear that the agency plans to pounce on new rules for mortgage-servicers in July.

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Delineating ""profound"" consumer financial protection deficiencies in the mortgage-servicing industry, Date reaffirmed the importance of the Dodd-Frank Act and said the ""CFPB"":http://www.consumerfinance.gov/ will deploy an arsenal of ""supervision and supervisory guidance, enforcement, and rule-making [sic]"" abilities to rein in an industry with $10.4 trillion principal balances outstanding.

Date said that a highly anticipated transfer of authority will empower the ""CFPB"":http://www.consumerfinance.gov/ to undertake new rule-writing assignments when it launches in two weeks, and that ""on that day, mortgage servicing will be one of the ""CFPB's"":http://www.consumerfinance.gov/ priorities.""

In citing the transfer of authority, Date referenced the transfer and centralization of 18 enumerated consumer financial laws and over 30 rules in the ""CFPB"":http://www.consumerfinance.gov/. By stripping nine rules from the ""Federal Reserve"":http://www.federalreserve.gov/, four from the Office of the ""Comptroller of the Currency"":http://www.occ.treas.gov/, five from the ""Office of Thrift Supervision"":http://www.ots.treas.gov/, and 13 from the ""Federal Trade Commission"":http://ftc.gov/, the bureau will assume their previous rule-making and enforcement abilities, making it the chief regulatory authority for consumer financial laws.

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Among the laws handed over in the transfer: the Truth-in-Lending Act, Home Mortgage Disclosure Act, Alternative Mortgage Transaction Parity Act, Real Estate Settlement Procedures Act, and Home Ownership and Equity Protection Act.

""The ""CFPB"":http://www.consumerfinance.gov/ will have the ability to revisit and change long-standing regulations"" with this transfer of authority, said Mark Calabria, director of financial regulation studies at the ""Cato Institute"":http://www.cato.org/, denoting a ""pretty broad"" scope of authority and jurisdiction made possible by the Dodd-Frank Act.

According to Date, the ""CFPB"":http://www.consumerfinance.gov/ plans to promulgate a rule in accordance with the transferred laws that allows consumers more freedom to choose their mortgage servicers ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô something he said consumers lacked without going into detail or specifying how the rule would protect consumers.

""In the vast majority of cases, consumers do not choose their mortgage servicers,"" he said. ""Mortgage servicing rights can be, and quite frequently are, bought and sold among servicers irrespective of the borrowers' consent.

""I get to choose my pharmacist. I don't typically get to choose my mortgage servicer,"" he added.

Date also described the ""CFPB's"":http://www.consumerfinance.gov/ bold prescriptions for foreclosure and settlement processes.

That kind of approach worries bureau watchers and analysts fretful about overreach.

""This agency is absolutely going to be aggressive about how to change the mortgage-servicing framework,"" Calabria said. ""We're going to see a much different world for mortgage servicing in the future"" once the bureau launches.

According to ""_Bloomberg News_"":http://www.bloomberg.com/news/2011-07-07/u-s-consumer-bureau-plans-to-write-rules-for-mortgage-servicers.html, the congressional committee asked Date to testify as it looks over gaps and lapses in the current body of mortgage servicing regulation.