Keynoting a forum hosted by the National Housing Conference and Intercontinental Exchange (ICE), Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra announced that the agency is considering tactics to smooth the runway for more refinancing as rates continue to ease moving forward.
Perhaps foremost among the CFPB’s potential routes are changes to current regulations aimed toward streamlining the refi process and reducing closing costs. Chopra didn’t go into too much detail, but according to him, it may not be worthwhile for a lender — whether it’s the existing lender on the first lien or a competing lender looking to entice the borrower away — to “repeat many of the steps that were taken during the original purchase process.”
“We are especially interested in the costs and time taken to refinance a mortgage that are exclusively related to complying with federal mortgage law, rather than steps that are demanded by investors,” Copra said. “We will also be identifying ways to jumpstart competition in various closing costs, which can also help spur refinancing activity.”
The CFPB is also working on amending its regulations to dovetail with the ongoing financial and mortgage industry shift to the “open banking” model — that is, the secure electronic sharing of consumers’ financial data across institutions and third-party providers to improve access and services for those consumers.
Specifically, Chopra expects the CFPB to finalize an initial rule on “personal financial data rights” next month. That rule would, per Chopra, empower people to give lenders permission to use their personal financial data in ways that will reduce underwriting costs over the long term. The rule would also give lenders more ability to use a family’s cash flow in the underwriting process, since borrowers could more easily share data on their income and expenses.
“After this initial rule, I expect there to be additional rules to cover more use cases for open banking, including for mortgages. I am especially interested in ways consumers could more easily permission other types of data, such as their credit score, rather than making every competing lender purchase it.”
Chopra said that the CFPB will be closely scrutinizing the implementation of new tech within the mortgage space, particularly when it comes to artificial intelligence. Chopra noted that some novel uses of generative AI can help lenders both lower costs and increase access to refi candidates, but also noted that it could aggravate disparities or “make people worse off” if used poorly.
“We are on the lookout for how new mortgage tech can contribute to discrimination, collusion, or other illegal activity,” Chopra said. “We have repeatedly made clear that there is no ‘fancy technology’ exception in our consumer protection and fair lending laws. In addition, we have finalized new rules on algorithmic appraisals. Importantly, the CFPB now has technologists embedded across our functions, and we are more prepared than ever to identify and prosecute violations of law.”
