Consumer Finance Insights
March 30, 2017

CFPB Begins Mortgage Rule Check-In

The five-year anniversary of some of the major financial regulations passed by the Consumer Financial Protection Bureau (CFPB) is coming up in January 2018, meaning that they will soon undergo a review to check on their effectiveness.  The Dodd-Frank Act requires the CFPB to review its rules five years after their effective date to make sure that the rules operate as the Bureau intended and that they are not having an undue burden on the entities they seek to regulate.  Some of the major rules related to mortgages, including the Ability-to-Repay Rule and other rules regulating the service industry, were implemented in January 2013, so they are soon coming due for their check-in.  Chris D’Angelo, the CFPB’s Associate Director for Supervision, Enforcement and Fair Lending, recently spoke at the American Bankers Association’s Government Relations Summit and indicated that, although the actual five-year anniversary of these rules is still several months away, the CFPB plans to get started on its review soon.

Specifically, D’Angelo identified the Ability-to-Repay Rule as a rule the CFPB would be reviewing in the next few months to make sure it has not been overly burdensome.  Given the new administration’s focus on reducing the regulatory burden on various industries, including the financial sector, it is not surprising that the CFPB would be interested in preemptively reviewing the effects of its rule-making.  Indeed, while this review is technically unrelated to the president’s February 3, 2017 Executive Order, entitled “Core Principles for Regulating the United States Financial System,” which looks to re-shape the Dodd-Frank Act, or the January 30, 2017 Executive Order, “Reducing Regulation and Controlling Regulatory Cost,” it is clear that the mood in Washington is shifting toward a reduction in existing regulations.  This effort to jump-start the five-year review of its mortgage regulations could be a tactical effort to make targeted changes in advance of even more explicit executive directives—if only to try to avoid further scrutiny from a president who has made it clear he believes the financial industry has been over-regulated for the last several years.  Whatever the motivation, the CFPB’s review is worth watching given the Ability-to-Repay Rule’s importance to the lending industry and the potential effect a roll-back may have on the loans available to consumers.