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   ARTICLE   |   From Scotsman Guide Residential Edition   |   October 2010

Keeping Tabs on Financial Reform

A new consumer bureau will affect brokers' business

As the Bureau of Consumer Financial Protection takes form, mortgage brokers should pay attention to developments and know which have the potential to change the way they do business. The bureau, established under Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, will eventually assume wide and often exclusive regulatory and enforcement authority of consumer financial products, services and offerings, including mortgages.

In large part, the bureau will be in charge of implementing and overseeing rules that govern mortgage brokers. As the bureau is established in the next weeks and months, brokers should familiarize themselves with its rulemaking authority and prepare for the changes that will follow.

The bureau will have authority over rulemaking and enforcement pertaining to the:

  • Real Estate Settlement Procedures Act;
  • Truth in Lending Act;
  • Secure and Fair Enforcement for Mortgage Licensing Act;
  • Equal Credit Opportunity Act;
  • Home Ownership and Equity Protection Act; and
  • Home Mortgage Disclosure Act.

All of the above are classed together under the term "federal consumer financial law." In other words, the Dodd-Frank Act centralizes almost all the regulatory responsibility for mortgage lending under the Bureau of Consumer Financial Protection.

Once established, the bureau will review periodic reports and conduct examinations to assess mortgage brokers', loan originators' and others' compliance with federal law. It also will monitor and assess consumer financial products and services for risks to consumers and markets.

Section 1024 under Title X of the Dodd-Frank Act addresses mortgage brokers specifically. It also speaks to other financial-services providers, such as those offering loan-modification services and payday lending.

Given that it addresses this wide range of services, discerning which parts of the section pertain specifically to mortgage origination can be difficult.

Brokers, however, should keep in mind that the concentration of consumer financial law under the Bureau of Consumer Financial Protection will bring new rules, procedures and interpretations. These will develop in the next several months and even years.

As of press time, President Barack Obama had yet to select a director for the bureau. That decision marks one of the first of which brokers will want to pay keen attention.

Although the Dodd-Frank Act speaks vaguely about many specifics of the bureau -- especially as it pertains to mortgage lending and mortgage originators -- the bureau's supervisory authority and enforcement powers are clear. Its general objectives are to:

  • Ensure timely and understandable disclosures;
  • Protect consumers from unfair, deceptive or abusive acts and practices and from discrimination;
  • Identify outdated, unnecessary or unduly burdensome regulations;
  • Enforce federal consumer financial law consistently and promote fair competition; and
  • Promote access and transparency in consumer financial products and services.

Transfer of oversight was to have been effective before the start of this month. The transfer of regulatory responsibility, however, will be implemented more slowly.

Whatever changes the bureau brings, brokers who adjust quickly and properly will put their business in the best position to succeed.


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