April 11, 2019
The Impact on the Bureau of Consumer Financial Protection on Mortgage Lending
The Bureau of Consumer Financial Protection (BCFP) (also known as the Consumer Financial Protection Bureau (CFPB)) initiated operations in the summer of 2011. It was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which was signed into law the previous year, and its purpose for existence has been to act as a guardian of sorts for consumer finances by writing and enforcing rules over banks, credit unions, payday lenders, debt collectors, securities firms, mortgage-servicing firms and so on. It acts as an internal, independent unit within (and funded by) the United States Federal Reserve, and is also linked with the U.S. Treasury Department. Dodd-Frank and the BCFP came as responses to the 2008 financial crisis, a sweeping set of regulations that asserted influence over the entire financial services industry with the goal of increasing stability in the financial sector and aiding consumer protection. There is much debate over BCFP’s economic effects at this point, including a great deal of speculation that the agency’s primary effect has been to decrease the availability of financial services.
The Federal Reserve in October released a report reflecting on the effects the BCFP has had on the financial services industry. The mortgage industry in particular was regarded with a close look, and the Fed compared the lending done by financial institutions meeting the $10 billion threshold for BDFP oversight with lending done by institutions not meeting this threshold to determine whether the BCFP’s oversight has had any negative effect. They approached this issue with the question: “Does CFPB oversight reduce overall lending?”
In order to determine this, the researchers divided into two groups financial institutions with assets from $1 billion to $25 billion as of the end of June 2011: the first group was those that went under BFCP oversight in the summer of 2011; the other was those that were not subject to such oversight.
Their finding overall was that the two groups tracked each other almost exactly through 2016; that oversight by the BCFP had no effect on mortgage lending done by subject banks—the numbers were no lower for the banks overseen by BCFP than they were for those exempt from oversight. Neither mortgage origination nor acceptance of mortgage applications appears to have been affected by oversight by the Bureau, as far as the Federal Reserve can tell.
One area in which there was a difference between the groups was in the composition of mortgage lending: institutions subject to BCFP oversight had seen a 6 percent drop in mortgages insured by the Federal Housing Administration. This reflects an aversion to risk.
If you’re shopping around for a home in Florida, Rhode Island or Massachusetts, and plan to get a mortgage from either a large institution subject to BCFP oversight or a smaller institution, contact us to see how we can help ensure proper transfer of title and provide title insurance. Topouzis & Associates, P.C., is backed by multiple underwriters, staffed by residential real estate specialists and ready to help you avoid costly delays and streamline your residential transactions.