Posted by Anthony Demangone
Over the Holidays, I was sipping my cup of eggnog while leafing through Newsweek. They had a short "question and answer" piece with none other than Elizabeth Warren. I suddenly worried if the article would dampen my Holiday cheer, as news of new regulations and new requirements tend to do that.
Perhaps she's been reading my blog, or perhaps Old Saint Nick blessed me with an early Christmas present. I found myself agreeing with much of what she said. Here's a link to the article. Here are some of the interesting sections.
Newsweek: The law requires the (CFPB) to come out with a model mortgage document within a year.
EW: My ambition is to create a one-page mortgage-shopping document that [would come] early in the process and have all the key terms the consumer needs to shop for a mortgage: the monthly payment, cash at closing, how long it will take to pay off the loan. That’s what produces real value for the consumer, and that’s what creates a more competitive mortgage market. Compliance also becomes much easier for lenders, and this is particularly important for community banks. Complex regulations are killing community banks. They can’t afford an army of lawyers to work through the regulatory thicket.
Amen, amen, amen. I've said this again and again - people assume that "banks" (a terms that seems to group Wall Street, community banks, credit unions, and interstellar institutions like BofA together) have entire buildings filled with regulatory attorneys who are waiting to analyze complex regulatory documents and create even-more complex account agreements. Wrong! A super-majority of credit unions have no attorney on staff. If regulations are clearly written, I think you'll see a strange occurrence. The regulatory burden will decrease, and compliance with regulations will increase. (By the way, every time I see the term "army of lawyers," I always think of this scene. (YouTube.))
Newsweek: Would this require new legislation?
EW: We may reach a point where we have to go to Congress and ask them to amend pieces of the 18 regulatory laws that are out there, to permit us to lighten the regulatory burden. Let’s pick one concrete example. There’s something called a TILA form [from the 1968 Truth in Lending Act], and there’s also a RESPA form [from the 1974 Real Estate Settlement Procedures Act]. Both are required by law as part of the mortgage documentation. They come shortly before closing—long after the consumer has shopped for the mortgage and decided to buy the home. These take real time to fill out. They drive up costs for the lender and produce no discernible benefit for the customer. I’d like the agency to push for a statutory mandate to compress the two forms into one. There have been talks for more than 20 years to merge these two forms. Why haven’t they been merged? One belongs to HUD [the Department of Housing and Urban Development], and one belongs to the Fed [the Federal Reserve]. Each issues under a different statute, and each agency has felt strongly that its version of the form is superior.
Anyone responsible for merging RESPA and TILA documents for mortgage lending gets a free beer from me. Even an import. The current dual disclosure system has been both confusing for consumers and needlessly burdensome for lenders.
Read the rest of the article yourself. Based on these excerpts, however, it seems that someone has Ms. Warren's ear who understands the impact of regulations on small financial institutions. This article gives one hope. But the proof of the pudding, my friends, is in the eating. We'll see how things eventually shake out at the CFPB.
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I think it is time to watch LOTR again. I am astonished by this reversal from EW! I am going to take it at face value and be optimistic here.
Posted by: Rob Rutkowski | January 05, 2011 at 10:27 AM
Rob - I agree. If there were a TV station that simply ran LOTR and The Shawshank Redemption on a continuous loop, I'd probably watch it 90% of the time. And I was very please to see Ms. Warren's comments. I wonder if she's been getting feedback on her earlier comments, and has decided to move a bit more in our direction.
Posted by: Anthony Demangone | January 05, 2011 at 10:33 AM