The Consumer Financial Protection Bureau (CFPB) published its 2013 Dodd-Frank Mortgage Rules Readiness Guide. The 22-page document, which is available online only, offers a summary of the rules, a readiness questionnaire, a frequently asked questions (FAQs) section and tools. It outlines the mortgage rules contained in the 2,400-page Dodd-Frank Wall Street Reform and Consumer Protection Act. Readers who want more information can click on various links and read more pages.
Marx Sterbcow, managing attorney with The Sterbcow Law Group in New Orleans, welcomes the guide. ‘Anything that helps lenders achieve compliance, or at least helps them with all the new regulatory rules and regulations coming out, makes things a whole lot easier and simpler,’ he says. ‘At least they will know the effective dates.’
Sterbcow says the guide can be especially useful for lenders with disorganized compliance departments, or even no compliance departments. ‘Lenders may be looking at some of these and thinking, 'Truth in Lending Act Appraisals? Compensation Requirements? What is that? We didn't even look at that.' It helps them bear down and gives them guidelines.’
Part I of the guide lists the eight final rules that the CFPB issued in January 2013. A paragraph summarizes each rule, ending with its effective date. The heading of each rule serves as a link to that rule's section of the CFPB website. For example, a reader who clicks on ‘Ability-to-Repay and Qualified Mortgage Standards (Regulation Z)’ jumps to the CFPB's page showing a summary of the rule, links to a breakdown of the document's contents, a chart comparing ability to repay and qualified mortgage, and links to related proposals. There is also a link to a chart that shows videos – the first one opens with an introduction by CFPB Director Richard Cordray – and the reader can view them all as a single playlist.
However, some industry experts are not impressed with all these links. ‘People have to go back and forth, so it's incredibly cumbersome,’ says Jerry Hanweck, professor of finance at George Mason University School of Management in Fairfax, Va.
Hanweck, who also sits on the board of directors for Millennium Bank in Virginia, says the guide reminds him of checklists that bank examiners use when they visit a bank. ‘This is a worksheet on what you have to do, but they don't tell you how to do it.’
For example, he says, the guide does not offer details about smaller lenders' exemptions from certain details of complex rules such as ability to repay. Someone reading the guide would have to click on several links to land on the Small Entity Compliance Guide.
Others say the guide offers good information. ‘It just basically gives you the highlights,’ says Donald J. Frommeyer, president of the National Association of Mortgage Brokers.
He adds that the Readiness Questionnaire, Part II of the guide, can be helpful as a self-assessment. The section asks questions ranging from ‘Do you offer mortgage loans to consumers?’ and ‘Do you have contracts with any third parties related to mortgage activities?’ to more specific exercises such as ‘Describe the steps you will take to ensure that new product development considers new regulatory rules and risks’ and ‘How will you roll out the changes to your training program?’ The questions are supposed to help the lender assess how far along they are in developing new rules.
Frommeyer, who is also senior vice president of Amtrust Mortgage Funding Inc. in Carmel, Ind., notes that the guide mentions loan originators but does not specify mortgage brokers, so its helpfulness is limited. ‘Part of the problem is you have different rules for banks, correspondent lenders and brokers,’ he says. ‘What they really should do is fix the mortgage business across the board. A mortgage is a mortgage is a mortgage.’
The links offer much more information about each rule, and the information is updated quickly. A broker seeking details on loan originator compensation requirements can jump to the CFPB's 80-page 2013 Loan Originator Rule, which was updated on June 7.
Part III, the FAQs, offers insight on how to contact the CFPB, what institutions must do on the effective dates, where to find examination procedures and other details. Part IV, Tools, provides links to plain-language summaries of the rules. There are also small entity compliance guides for the rules.
‘I think the whole thing is a good effort,’ Sterbcow says. ‘The CFPB didn't have to do this. They did it to help the industry with questions and concerns.’
Nora Caley is a Denver-based freelance writer.