CFPB Protecting Consumers in the Housing Market
Written by: Kristy Welsh
Last Updated: August 30, 2017
Of all the financial decisions you make over the course of a lifetime, deciding to buy a home likely tops the list. For this reason, the Consumer Financial Protection Bureau (CFPB) is particularly invested in oversight of the mortgage market.
CFPB Regulates the Mortgage Industry
Numerous rules and regulations exist to protect consumers in the mortgage market. If and when these rights are violated, it is the job of the CFPB to step in.
In May 2014, the CFPB fined RealtySouth $500,000 for neglecting to disclose that the company it was recommending for title and closing services one of its own affiliates.
In July 2014, the CFPB joined with the FTC in taking action against nine mortgage assistance relief servicers. In what was known as Operation Mis-Modification, the agencies discovered these servicers were engaged in illegal practices, like collecting up-front fees and promising foreclosure prevention.
In August 2014, the CFPB took action against mortgage lender Amerisave for deceptive practices, including misleading consumers about interest rates, charging upfront fees before providing a Good Faith Estimate, and neglecting to disclose to consumers that appraisals were being made by one of its affiliates. For these violations, the CFPB fined Amerisave and its affiliate, Novo Appraisal Management Company, $19.3 million, and fined owner Patrick Markert an additional $1.5 million.
Proposes and Enforces Mortgage Rules
“It is critical that we shed more light on the mortgage market — the largest consumer financial market in the world,” says CFPB Director Richard Cordray.
To that end, in January 2014, the CFPB’s new mortgage servicing rules went into effect, including changes relative to:
- Loans based on a borrower’s ability to pay
- Qualified Mortgages (i.e., mortgages considered by the CFPB to be ones that borrowers have the ability to pay on)
- Steering restrictions
- Improved loan management
- Foreclosure process limitations
Then, in July 2014, the CFPB proposed new rules governing the reporting of mortgage data, largely to ensure lenders are not engaging in discriminatory lending practices.
The proposal called for a number of changes, but most notably for lenders to:
- Report property value, term of the loan, total points and fees, duration of any teaser or introductory interest rates, applicant’s or borrower’s age, and credit score.
- Report more details about underwriting and pricing, including applicant’s debt-to-income ratio, interest rate of the loan, and total discount points charged for the loan.
Promotes “Know Before You Owe” Initiative
The CFPB’s simplified mortgage disclosure forms help ensure borrowers understand what they’re getting into, particularly relative to
- Risk factors
- Short-term and long-term costs
- Monthly payments
Offers Mortgage Data Tools
What types of mortgages are being approved in your area?
What types of borrowers are being approved these loans?
Which lenders are approving them?
These are all questions you can answer via the CFPB’s mortgage data tools, an invaluable resource for being as informed as possible before throwing your hat into the housing market.
Advises Free Foreclosure Help
Rather than allow the fear and uncertainty of losing a home to foreclosure cloud your judgment, the CFPB advises you to use caution when it comes to mortgage assistance relief companies:
- Do not do business with anyone who asks for upfront fees before they have performed a service
- Do not do business with anyone that guarantees they can stop the foreclosure process (there is no such guarantee)
In fact, instead of paying someone to help you stop a foreclosure, the CFPB says you are far better-served utilizing free resources.
The CFPB website links to state agencies and HUD-approved housing counselors that can help.
Provides Training for Housing Counselors
If and when you need to contact a housing counselor for help in avoiding foreclosure, you need them to be up to speed on the latest mortgage servicing rules.
To that end, the CFPB created the Guide to Mortgage Servicing Rules, covering:
- The 10-step loss mitigation process
- Foreclosure prohibitions
- Charges and fees that can be imposed on a borrower
- The error resolution process
- Borrower requests for information
- Borrower requests for payoff statements
The CFPB has also provided on-site and virtual training to thousands of housing counselors nationwide.
Accepts Mortgage Complaints
Have you had trouble with a home loan? Problems applying for a mortgage? Being approved or denied credit? Trouble understanding the loan? Issues with payments? Issues when signing the agreement? Problems resolving things if and when you were unable to pay?
Whatever the issue relative to your mortgage, the CFPB wants to hear about it. When you submit a complaint to the CFPB:
- Your complaint and supporting documentation is forwarded to the company for their review.
- The company has 15 days to respond to the CFPB and to you.
- The CFPB provides you with email updates on your complaint status.
Note, the CFPB also shares complaints with state and federal law enforcement agencies, and sends a complaint report to Congress twice a year. Your complaint may also be posted to the Consumer Complaint Database (minus any personally-identifying information).