The Consumer Financial Protection Bureau (CFPB) has a new acting director, none other than the secretary of the Treasury Scott Bessent.
The news was announcement Today after cooking From the former director of the CFPB, Rohit Chopra, this weekend, who had been in charge of the agency since September 2021.
He questioned what comes to the agency, which was born from the great financial crisis (GFC) in the early 2000s.
A key achievement of the CFPB was the creation of the reimbursement capacity / the qualified mortified rule (ATR / QM).
Among other things, he obliges mortgage candidates to qualify by using verified financial information, while prohibiting the characteristics of risk loans such as negative amortization.
Why was the CFPB created anyway?
I have long said that the difference between the housing market in the early 2000s and today are the rules in place for the financing of real estate loans.
In the early 2000s, you can withdraw a mortgage with Zero Down while providing very little financial documentation.
Often, a credit report is enough to be approved for a mortgage. And you could even manage with a subprime credit rating, below 620.
The amount of risk in layers at the time was beyond pallor. Imagine an investor buying a property of four units without money, a score of 620 fico and zero documentation.
And in addition to that, by removing a mortgage with adjusted rate only of interest, or perhaps worse, a negative depreciation loan where monthly payment did not even cover the minimum amount of the interest due.
Not all of the home assessors were well regulated, which caused the prices of house prices which, with hindsight, were clearly not durable.
This is what led to the collapse of the housing market at the time, as well as countless banks and lenders that make their doors.
It was so bad that it led to a major reform, namely the Dodd-Frank law in 2010. Some of these scanning changes led to the creation of the CFPB.
What is the purpose of the CFPB?
In his own wordsThe CFPB was created to “increase the government’s responsibility by consolidating the financial protection authorities of consumers who had existed in seven different federal agencies in one”.
The Independent Agency has consolidated the employees and the responsibilities of several existing agencies, in particular the Federal Reserve, the FTC, the FDIC, the NCUA and the HUD.
The conduct of its creation was the fact that “the financial protection of consumers had not been the main objective of a federal agency”, and only one agency did not have the tools necessary to supervise the entire market.
“The result was a system without effective rules or coherent application. The results can be seen, both in the 2008 financial crisis and its consequences. »»
The CFPB has done a lot since creation, including the reduction of banks and lenders, limiting the late credit card, reducing mortgage waste and, more recently, reducing the impact of medical debt on reports credit.
In the mortgage world, CFPB Know Before You must have led you to create the loan estimate (Le) and closing disclosure (CD).
These have replaced the long-standing good faith estimate (GFE), the truth in the disclosure of loans (TIL) and the HUD-1 to help consumers better understand the conditions of their loan and the many costs linked to obtain a mortgage.
They also created and implemented the ATR / QM rule in early 2014 to ensure that we will not suffer another mortgage crisis fueled by toxic loans.
And so far, it could be said that this has worked well, even if there are still questionable mortgages.
What does the new leadership at CFPB mean for the housing market?
For the moment, we do not know what will change at CFPB. But the staff were invited to High work.
However, one thing remains clear.
We must make sure that the mortgage protections implemented about a decade ago remain in place to move forward.
The last thing we want is a decline in all consumer protection or a return to loose loan seen at the time.
As I said, the lack of high -risk mortgages on the market today has maintained the housing market buffered from another major accident, despite poor affordability.
If these protections were to be deleted, we would be back in difficulty in no time. This does not mean that it will happen under a new leadership, but it is something to keep an eye.
Today, it is much more difficult to overload an owner or put them in a type of loan that is not beneficial for them.
This includes things like 40-year-old mortgages, Neg-Am loans and prepayment penalties, or simply a loan that the owner cannot really afford.
Hopefully this will remain in the future and that additional protections are put forward if and if necessary.
The key to a healthy housing market, apart from the appropriate offer, is a safe and solid subscription. Without that, we could be condemned to repeat history as soon as possible.
Read more: Will the housing market block in 2025?
(photo: Pear))
Before creating this site, I worked as account manager for a wholesale mortgage lender in Los Angeles. My practical experience in the early 2000s inspired me to start writing on the mortgages 19 years ago to help potential (and existing) buyers better navigate in the mortgage process. Follow me on X for hot catches.