Jeb Hensarling, the recently appointed chairman to the House Financial Services Committee, has been critical of the CFPB’s ability-to-repay and qualified mortgage rule released last week.
“These types of ‘one-size fits all’ solutions always—always—are fraught with unintended consequences,” Hensarling said. “After all, government regulations and policies that strong-armed, incented and cajoled financial institutions into loaning money to people to buy homes they couldn’t afford are a major reason why we had the financial crisis to begin with. Ironically, now we have government regulations attempting to tell financial institutions not to do what the government was telling them to do before.”
Regulation Z of the Truth in Lending Act prohibits a lender from issuing a higher-priced mortgage loan without examining the potential borrower’s ability to repay the loan. The CFPB’s final rule implements provisions from the Dodd-Frank Act that require creditors to make “a reasonable, good faith” determination of a borrower’s ability to repay their financial obligations.
“We have already started to see a consolidation in this market as participants, including banks and other mortgage loan originators, pull back from offering their products and services,” Hensarling said. “As the Financial Services Committee examines this and other mortgage rules, we will look to see how they will impact a community financial institution’s ability to compete and offer sustainable, affordable mortgages, or whether they will cause a further consolidation toward our nation’s perceived ‘too big to fail’ banks. We will also examine the extent to which these rules impact a qualified consumer’s ability to access credit, particularly for consumers in small and rural markets.”
Additionally, Hensarling was critical of the CFPB and its “unchecked” powers granted by Dodd-Frank.
“The CFPB has been given a job that is both impossible and dangerous,” Hensarling said. “Impossible because the CFPB is a big government bureaucracy in Washington attempting to determine which mortgages are appropriate for 100 million Americans, each of whom have their own personal circumstances that the CFPB knows nothing about. Dangerous because the CFPB has been given vast, unprecedented and unchecked power, all delegated to a single director whose alleged recess appointment by the President is legally questionable. Rather than bringing greater certainty to the marketplace, every decision made by the CFPB will therefore be under a cloud. All could be overturned because the CFPB director’s appointment is possibly unconstitutional, unlawful or both.”