Appellate Judges

The Anti-Consumer Watchdog is Actually a Bankers Institution. The US Supreme Court Should Dismantle the CFPB, an Unaccountable Agency.

The Consumer Financial Protection Bureau (CFPB) is a Bankers Institution and to call itself a Consumer Watchdog Agency is literally fraud upon the people.

LIT COMMENTARY

The CFPB is a Bankers Institution and to call itself a Consumer Watchdog Agency is literally fraud upon the people. As the nation waits for the US Supreme Court to issue the Selia Law case opinion, LIT would suggest this agency be completely dismantled.

Yesterday, Justice Sotomayor made a positive move in her authored opinion in Liu v. SEC. The court reaffirmed the agency’s authority to seek disgorgement, a part of its civil enforcement arsenal aimed at passing on funds acquired in fraudulent schemes to the original investors. The court also decided that disgorgement generally must go to investors.

“Today’s decision allows us to continue to strip wrongdoers of their ill-gotten gains and return money to its rightful owners,” an SEC spokesperson said. That is something which the CFPB has not done consistently.

Secondly, any agency that calls itself a consumer watchdog and partakes in the abhorrent acts associated with the Burkes’ intervention case in Florida, is inexcusable.

CFPB to eliminate DTI requirement from qualified mortgage standards

Extends QM patch for transition

Originally published; June 22, 2020

The Consumer Financial Protection Bureau announced Monday two notices of proposed rulemaking surrounding what’s commonly known as the QM Patch. One of those rulemakings would remove the debt-to-income requirement from qualified mortgages.

Back in January, CFPB Director Kathy Kraninger sent a letter to several prominent members of Congress, saying the bureau has decided to propose an amendment to the QM Rule that would “move away” from DTI as a factor in mortgage underwriting.

Specifically, Kraninger said at the time that the CFPB has decided to shift from the DTI standard and move to an “alternative, such as a pricing threshold (i.e., the difference between the loan’s annual percentage rate and the average prime offer rate for a comparable transaction.)”

Now, Kraninger is following through on that plan.

In the first notice of proposed rulemaking, the bureau wants to amend the qualified mortgage definition in Regulation Z to replace the DTI limit with a price-based approach, saying it preliminarily concludes that a loan’s price, as measured by comparing a loan’s annual percentage rate to the average prime offer rate for a comparable transaction, is a more holistic and flexible measure of a consumer’s ability to repay than DTI alone.

For eligibility for QM status under the General QM definition, the bureau is proposing a price threshold for most loans as well as higher price thresholds for smaller loans, which is particularly important for manufactured housing and for minority consumers. The NPRM also proposes that lenders take into account a consumer’s income, debt and DTI ratio or residual income and verify the consumer’s income and debts.

The Ability to Repay/Qualified Mortgage rule was enacted by the CFPB after the financial crisis and requires lenders to verify a borrower’s ability to repay the mortgage before lending them money. This includes a review of a borrower’s debts and assets to ensure they have the ability to repay the loan, with a stipulation that their DTI ratio does not exceed 43%.

But Fannie Mae and Freddie Mac are not bound to this requirement, a condition known as the QM Patch. Under the QM Patch, loans sold to Fannie Mae or Freddie Mac are allowed to exceed to the 43% DTI ratio.

“The GSE patch’s expiration will facilitate a more transparent, level playing field that ultimately benefits consumers through promoting more vigorous competition in mortgage markets,” Kraninger said. “The bureau is proposing to replace the patch with a price-based approach to QM loans to preserve consumer access to mortgage loans while also making sure consumers have the ability to repay them. The bureau is committed to ensuring a smooth and orderly mortgage market throughout its consideration of these issues and any resulting transition away from the GSE Patch.”

The QM Patch is due to expire in January 2021, and last year the CFPB moved to officially do away with the QM Patch on its stated expiration date, however the second notice of proposed rulemaking from the CFPB Monday would move that date to ensure a smooth transition.

The bureau proposed to amend Regulation Z to extend the QM Patch to expire upon the effective date of a final rule regarding the first notice’s proposed amendments to the General QM loan definition in Regulation Z.

“The bureau is proposing to take this action to ensure that responsible, affordable credit remains available to consumers who may be affected if the GSE Patch expires before the amendments take effect as defined in the first NPRM,” the CFPB stated.

This could come as welcome news to the housing industry, which has long been calling for an end to the QM Patch.

“America’s Realtors applaud the CFPB’s action to provide a temporary QM patch extension, and commend the bureau and Director Kraninger for acting on behalf of our nation’s consumers and homebuyers at a time when market stability is so critical,” National Association of Realtors President Vince Malta said. “Perhaps most importantly, we appreciate the Bureau’s decision to eliminate a hard DTI standard, and we look forward to more closely examining the proposed replacements and their impact on homebuyers over the coming months.”

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Laws In Texas is a blog about the Financial Crisis and how the banks and government are colluding against the citizens and homeowners of the State of Texas and relying on a system of #FakeDocs and post-crisis legal precedents, specially created by the Court of Appeals for the Fifth Circuit to foreclose on homeowners around this great State. We are not lawyers. We do not offer legal advice. We are citizens of the State of Texas who have spent a decade in the court system in Texas and have been party to during this period to the good, the bad and the very ugly.

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