As published in Scotsman Guide's Residential Edition, July 2011.
Lisa Donner’s leadership of Americans for Financial Reform (AFR) began this past August, one month after the Dodd-Frank Wall Street Reform and Consumer Protection Act became law. Since then, the consumer-advocacy organization has championed the law and supported a strong Consumer Financial Protection Bureau (CFPB). Many of AFR’s efforts challenge U.S. senators hoping to weaken the CFPB before its official establishment this month. To hear Donner tell it, mortgage pros and AFR want many of the same things.
The Dodd-Frank Act was signed into law almost a year ago. What were its most-important elements? The creation of the CFPB is clearly one of them. It’s a major accomplishment and a major piece of progress for the public interest. Putting down some protections for mortgage borrowers was another. This includes the ban on prepayment penalties for most mortgage types, the ability-to-repay provisions, the prohibitions on steering and on yield-spread premiums, and the prohibition of mandatory-arbitration clauses.
Why has the CFPB received so much criticism? Some of it’s ideological, some of it’s political, and some of it’s from parties who benefited from there not being clear rules. It will serve the industry and consumers to have a level playing field and clear rules that allow people to compete with good and useful products rather than see who’s willing to be deceptive or misleading.
Many in the mortgage industry worry that mortgage affordability will suffer if the CFPB takes control and implements the law as passed. Does AFR share those concerns? We are very aware that low- to moderate-income folks and communities of color suffered disproportionately the consequences of abusive lending and of the financial crisis. It would be a pretty terrible irony if one of the responses to that is to tighten up access to credit in ways that set restrictions on downpayments or credit-history standards that disproportionally affect those same communities.
How can that irony be avoided? There’s a long history of making good, safe loans with low downpayments when those loans are well-underwritten and fairly structured — when they’re not trick-and-trap loans; when they’re not two years at a rate you can afford and suddenly it’s a rate you can’t; when they’re not loans written without regard to people’s ability to pay. A lot of the important work in response to Dodd-Frank has involved trying to get the rules right and building the CFPB so it’s ready to be successful when it opens its doors.
Who should be the bureau’s first leader? We have been longtime supporters of Elizabeth Warren. We think she’s doing an excellent job putting the bureau together and that she would do an excellent job as a first director. She has a deep knowledge of the credit markets and a deep understanding of the challenges working families face.
Darrick Meneken is an associate editor at
Scotsman Guide. Reach him at (800) 297-6061 or firstname.lastname@example.org.