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Residential Department: The FinePrint: January 2011


The FinePrint

In the past year, there has been an important discussion about the future of the housing and mortgage markets and the government’s role. This will be hotly debated in the coming months, as well, and many seek to bring fundamental change to the industry.

Change is already in progress, brought on in part by the Dodd-Frank Wall Street Reform and Consumer Protection Act — signed into law this past July. The act attempts to bring federal control and oversight to a wide range of financial industries, including investment banking, insurance, credit cards, student loans and mortgage loans.

Among its wide-reaching changes, the Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB), which will have broad powers to regulate all aspects of consumer finance.

Currently, the bureau is standing up, but it does not yet have an official director. President Barack Obama appointed Harvard University Law School professor and former chairwoman of the Congressional Oversight Panel Elizabeth Warren as special adviser to U.S. Department of Treasury Secretary Timothy Geithner. Warren, appointed this past September, is to help guide the bureau’s establishment. At the White House ceremony announcing her appointment, Obama mentioned the bureau’s necessary role in ensuring clear and concise information is provided to consumers about financial products to help them make good financial decisions, to prevent them from being confused and misled by barely understandable fine print, to guard against abusive mortgage-lending practices, and to enforce the new credit card laws.

Warren also will help determine who the bureau’s director will be. It is not clear how much actual regulatory power the agency will have without a congressionally approved director, but it must be fully operational by this coming July 21 — the date designated for transfer of regulatory powers. At that time, the bureau will have oversight for the consumer-financial-protection function of the federal banking agencies, as well as certain authorities currently carried out by the U.S. Department of Housing and Urban Development and the Federal Trade Commission.

The effort needed to launch the CFPB and the question about the extent of its regulatory authority before the transfer date and the actual appointment of a new director may reduce the impact of the bureau.

It will be important for mortgage brokers to stay informed about the bureau’s progress because it will have direct oversight of mortgage origination and servicing.

See for more information on the bureau’s oversight of nonbanks.

There are many more changes in store that will affect loan-originator compensation, appraiser independence, reform of the government-sponsored enterprises, housing-policy debate and more in the coming months and years. Stay informed, and stay involved.


Richard Smith is a loan originator with Churchill Mortgage in Chattanooga, Tenn. He had been the retail manager with American Acceptance Mortgage Inc. for 15 years. He lends in Tennessee and Georgia. He has originated government, conventional and jumbo loans since 1994. Smith writes a monthly column on regulatory and legislative issues for Scotsman Guide. Reach Smith at (423) 899-6898 or at Visit for more information.

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