After the housing market collapse, a number of borrowers who defaulted on their mortgages and subsequently entered the foreclosure process cried foul. Now, one government agency hopes to create regulations that would put an end to predatory lending practices and make the home loan sector a safer place for Americans.
The Consumer Financial Protection Bureau, which was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act, plans to make it easier for Americans to understand what they are getting themselves into when they take on a home loan, the New York Times reports.
"We have an overarching goal here, which is to restore trust in the consumer financial marketplace," CFPB director Richard Cordray told the newspaper. "I don't think we are just a regulatory body or just an enforcement body."
Specifically, the agency plans to make it mandatory for brokers and lenders to give borrowers a disclosure form outlining their interest rates, mandatory monthly payments, closing fees and how much their mortgages could change in the future, the report said. In addition, banks will also be required to provide distressed households facing foreclosure with better service and options to avoid repossession. Specific regulations are expected later this year.
Not everyone is on board
Meanwhile, these measures are meant to make the mortgage industry a more transparent market, rather than create red tape for lenders. However, even though the CFPB has tried to reassure financial institutions that these regulatory measures would not negatively impact their books of business, a number of banks, lawmakers and industry groups still oppose their implementation.
Recently, the Mortgage Bankers Association said in testimony before Congress that the CFPB's efforts are admirable, but should not be put into effect all at once. The MBAA claims both borrowers and lenders could suffer if the CFPB were to do so.
Some legislators are also opposed to the actions. Many of them feel that the CFPB lacks accountability, and the agency should be restructured into a five-person committee, rather than have a single head.
"After six months, the only definitive conclusion one can reach about the CFPB is that it's a rapidly expanding bureaucracy that is increasing costs on small businesses and remains completely unaccountable to the American people," said Senator Richard Shelby, according to the Times.