Dodd-Frank Act - Part III: CFPB - Bureau and Bureaucracy

COMMENTARY: by JONATHAN FOXX

Jonathan Foxx, former Chief Compliance Officer of two publicly traded financial institutions, is the President and Managing Director of Lenders Compliance Group, the first full-service, mortgage risk management firm in the country.

I think you will be interested in reading my newest article in the National Mortgage Professional Magazine, the national publication that is considered the premier mortgage industry magazine for mortgage originators.

This is the third article in a 3-part series that dissects the landmark financial reform legislation now known as the Dodd-Frank Act.

In this final article, I consider the new Bureau of Consumer Financial Protection and offer some observations on how the many features of the Act may affect the mortgage industry's prospects.

This new article is entitled Part III: Consumer Financial Protection - Bureau and Bureaucracy.

In this article, I turn my attention to the very core of the Act itself vis-à-vis the mortgage industry and consumer financial protection: the Bureau of Consumer Financial Protection (known also as the "Consumer Financial Protection Bureau," or "CFPB").

And, I provide a matrix of the supervisory units and their functions, and respective compliance requirements, that the Bureau's Director must establish.

EXCERPT

A Thought Experiment:

A vast, entangled array of very small and sleek wires, super strong magnets, and very wide and long cables extend out omnidirectionally - all of which lines and circuits are laid throughout a network of interlocking, electrically generated devices that are held in place in their respective positions on a shaky iron scaffold by fraying, single-knotted ropes.

The devices are needed to power vital and critical services to a community. But, due to wear and tear on their bindings, some devices are about to break free, threatening to pull down with them the entire array of wires, magnets, cables, and other devices. Any device can plummet at any time. Before it is too late, all the lines must be disentangled, traced to each of the devices, and rerouted to a new and more stable grid; plus, the devices themselves must be transferred, one by one, to the new grid without damaging them, and then reconnected to their lines.

But the collapse can take place at any time. A "crisis" looms!

So, how are you going to accomplish this heroic task quickly and effectively?

Now let's consider this analogue: the energy source is Constitutional authority; the grid is the financial regulatory framework; wires and cables are the ways and means that implementing regulations affect one another; magnets are the legal foundations (i.e., case law precedents (stare decisis), statutes (federal and state), Constitutional laws or rights) on which all subject enumerated laws rest; devices are the existing regulations; and ropes are the various governmental agencies that are charged with enforcement of and monitoring compliance with specific implementing regulations.

By the end of this article, I hope you will have decided how best to solve the above-described and admittedly convoluted "crisis." This article and the preceding articles in this series outline how Congress decided!

LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.