Will CFPB Changes Make Mortgages Easier in 2018?
Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB) resigned from his position as head of the bureau effective Friday, November 24th, 2017.
The CFPB was created in 2012 to oversee consumer finance industries that offer consumer credit products like pay day loans, credit cards, student loans and home mortgage loans. Richard Cordray has been the Director of the Bureau since it was created.
While the intention of an oversight agency makes sense on it’s surface, the CFPB has been controversial, and has been widely criticized as having too much power and not enough accountability or oversight.
As recently as June 2017, the House lawmakers passed the “Financial Choice Act” which seeks to undo significant parts of the 2010 Dodd-Frank financial reform law. I think this is a sign of things to come.
The Politics of Consumer Protection
After the great real estate crash of 2007, there was a scramble to put regulation and monitoring mechanisms in place to make sure that something of this magnitude does not happen again.
There has always been a tremendous amount of partisan opinion about the role of the CFPB and the regulations that it oversees. The timing of the financial crisis found Democrats largely leading the charge on financial regulation.
The other side of the political aisle has complained from the beginning that there is too much of the wrong kind of regulation, without the appropriate oversight mechanisms in place.
The Republican argument has long been that the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, is bad for businesses and consumers.
Mick Mulvaney, the President’s choice for the interim Director at the CFPB has not been shy about his opinion of the challenges with how the CFPB exists in it’s current state today.
Mulvaney is on record as saying that the agency is a “sick, sad joke”. He also observed that while “some of us would like to get rid of it” altogether, that wasn’t politically plausible. So instead, he said he would push for changes that are as close as possible to getting rid of it completely.
This article is not about politics. I bring up the politics surrounding the CFPB because I believe it’s relevant in the context of “who” is making decisions about “what” changes need to take place to better serve affected Americans.
I believe that the political leanings of the people in charge of these changes gives us some insight about how the new guard is going to look at the current state of this regulatory Bureau.
Rolling Back Regulation?
Since the new Administration has taken office, the lifting of regulatory restrictions across many industries has been it’s primary mission, and is being credited as the reason for much of the economic recovery we’ve seen over the past year.
The removal, or rolling back of regulatory restrictions has been credited as one of the primary drivers of the Dow hitting record highs 74 times over the past year, businesses moving back to America, companies hiring, wages increasing, and unemployment hovering at 16 year lows since the middle of 2017.
Is all of this economic growth because of the removal of regulatory restrictions on corporations? I’m not an economist or politician so I really don’t have a dog in this fight.
Regardless of what you think about the politicians that run our Country, we are all subject to dealing with the consequences of the decisions that they make. It now appears that 2018 is going to bring in a new age for the CFPB.
Will Qualifying for a Mortgage Get Easier?
There is no question that the regulation that came out of the financial crisis has made it more difficult for many to qualify for a home mortgage loan.
As loose as guidelines were prior to the financial crash, it seems that the risk pendulum has swung completely to the other side of the spectrum, resulting in a tightening of mortgage underwriting guidelines that left many potential home buyers with fewer options for financing a home.
With the introduction of the Ability-to-Repay and Qualified Mortgage Rule that was rolled out in 2014, mortgage underwriting guidelines are as strict today as I’ve seen in my 20 years in the mortgage and real estate business.
Over the past few years, portfolio lenders have introduced loan products that are considered “Non-QM”. This basically means that these loans are underwritten and serviced by investors that offer flexible guidelines when traditional financing is too restrictive to work.
My prediction is that we will begin to see more creative mortgage solutions as early as 2018. This is just an “educated guess” and I’m sure there are many political and economic arguments that can be had about whether or not any changes will be effective or justified.
What exactly these changes might be, it’s difficult to say. Not all change is good, and not all good change is good for everyone.
We’ll just keep an eye on this story and follow up once we have more to report…..
Get Your Questions Answered
If you are like most people that visit this website, you’ve got a mortgage problem or an unanswered question and you’re having trouble getting answers.
We are here to help you get the right answer, the first time, and connect you with an experienced loan officer that can help if necessary.
Asking Your Question is Easy
- Email me Directly: Simply click the email icon at the top of the site. These questions come directly to me and are answered very quickly.
- Leave a Comment: Below every article is the option to leave a comment or question. We see these comments and questions in real-time and every question is answered.