Elizabeth Warren's Interview

In July 2011, I published my interview of Elizabeth Warren, entitled Opening a Dialogue: Elizabeth Warren and the Mortgage Industry.*

I have been told that this interview is one of the last published interviews of Mrs. Warren prior to President Barack Obama's announcement of the nomination of former Ohio Attorney General Richard Cordray as the first director of the Consumer Financial Protection Bureau (CFPB) on July 18, 2011. Until that point, Mrs. Warren was acting in the capacity of the interim director of the CFPB.

READ WARREN INTERVIEW

In August 2011, Mrs. Warren began to receive substantial political support from many political organizations and private citizens, and on September 14, 2011 she announced her campaign as a candidate for Senator of Massachusetts.

Mrs. Warren is known to be a fierce consumer advocate and is considered by many to be the primary visionary behind the creation of the Consumer Financial Protection Bureau. The CFPB - these days known more and more colloquially as the "Bureau" -  was established by the Dodd–Frank Wall Street Reform and Consumer Protection Act and signed into law by President Obama in July 2010. For the first year after the bill's signing, Mrs. Warren worked tirelessly as the CFPB's Special Assistant to the President to “stand up” the Bureau.

But Warren's nomination for the Director's position was not put forward by Mr. Obama because of his conclusion that her nomination would be too politically contentious.

Notwithstanding the political environment, the CFPB received its enumerated authorities on July 21, 2011.

Due to the partisan resistance to virtually any nomination for Director - some members of Congress wanted to disempower the CFPB or defund it – Mr. Obama felt constrained to appoint former Ohio Attorney General Richard Cordray to be the Director of the CFPB in January 2012, through a "recess appointment", over the objections of Republican Senators.

Last week Mrs. Warren, the 63-year-old Harvard Law School professor, was elected the first female U. S. Senator of Massachusetts by the considerable lead of 54% to 46% over Scott Brown, who had been elected in 2010 to fill out the late Edward M. Kennedy’s term. Her acceptance speech included her promise that she would be "a fighter for the middle class".

Soon, Mrs. Warren will take her oath as the junior Senator of Massachusetts.

With this in mind, I thought it would be informative to consider Mrs. Warren's responses to the questions I posed in my interview, in the context of what the CFPB has accomplished to date and has pledged to accomplish in the future.

READ WARREN INTERVIEW

I have written extensively about the CFPB. If interested, please feel free to view or download these articles, newsletters, and recent papers.

For selected issuances involving the CFPB, visit our library.

Although it is in its infancy, perhaps we can begin to discern the broad outlines of the CFPB’s commitment to the vision of consumer advocacy set forth by Mrs. Warren.

____________________________________________________________

IN THIS ARTICLE

Organizations that Accepted Participation

Organizations that Declined Participation

Questions

In Her Own Words

Library

____________________________________________________________

Organizations that Accepted Participation

READ WARREN INTERVIEW

Nearly all major mortgage industry associations responded to my invitation to provide questions to me to ask Mrs. Warren. Many interview questions, though very important, were also very specific, and it was just not possible for Mrs. Warren to answer such questions of detailed specificity, prior to the CFPB being empowered to evaluate rulemaking and policy alternatives.

Nevertheless, I proffered a wide enough scope of questions that we were able to obtain firm and clear replies.

Organizations that Accepted Participation

Association of Residential Mortgage Compliance Professionals (ARMCP)
Jonathan Foxx, President

Community Mortgage Bankers Project (CMBP) Glen Corso, Managing Director

Impact Mortgage Management Advocacy & Advisory Group (IMMAAG)
Bill Kidwell, President

National Association of Independent Housing Professionals (NAIHP) Marc Savitt, President

National Association of Mortgage Brokers (NAMB)
Don Frommeyer, Them President Elect

National Association of Professional Mortgage Women (NAPMW)
Laurie Abshier, National President

National Association of Realtors (NAR)
Lucien Salvant, Managing Director

National Credit Reporting Association (NCRA) Terry Clemens, Executive Director

National Reverse Mortgage Lenders Association (NRMLA)
Daryl Hicks, Vice President, Communications

Real Estate Services Providers Council (RESPRO)
Sue Johnson, Executive Director

_____________________________

Organizations that Declined Participation

American Bankers Association (ABA)
Peter Garuccio, Vice President, Public Relations

Mortgage Bankers Association (MBA) John Mechem, Sr. Director - Public Affairs Communications & Marketing

_____________________________

Consumer Financial Protection: Bureau or Bureaucracy?

Part III of a Three-Part Series on Financial Reform Legislation
Dodd-Frank: Legislation - Reactive or Proactive
Author: Jonathan Foxx
Published in National Mortgage Professional Magazine
First Published: October 2010

Although Elizabeth Warren has left the Consumer Financial Protection Bureau, her views continue to provide inspiration to its management and staff. Perhaps it would be wise to read the article I wrote last October, outlining the CFPB, its mandates, and its prospects.

__________________________________________

Society is founded not on the ideals but on the nature of man

and the constitution of man rewrites the constitutions of states.

But what is the constitution of man?[i]

Will and Ariel Durant

In the first two parts of this 3-part series,[ii] we have explored the basic structure of the new financial reform law, known as the Dodd-Frank Act (“Act”), as it affects residential mortgage loan originations.[iii] We have already given consideration to the many mortgage loan regulatory provisions that the Act covers[iv] and especially to the Mortgage Reform and Predatory Lending Act, a primary component of this landmark financial legislation.[v]

Now, we will turn our 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 hereinafter as “Bureau”).[vi]

But first, a Thought Experiment.[vii]

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 (see below) 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!

Please keep in mind that this series on the Dodd-Frank Act is meant to provide an overview. However, the legislation itself is extremely detailed and extensive. Therefore, for guidance and risk management support, I strongly recommend that you consult a risk management firm, residential mortgage compliance professional, or regulatory counsel to develop policies and procedures to implement the Act’s requirements.

One Bureau, Many Bureaucrats

Nothing is more destructive of respect for the government

and the law of the land than passing laws

which cannot be enforced.[viii]

Albert Einstein

There are numerous existing consumer protection laws that will be included in the transfer to the Bureau by July 21, 2011, the Designated Transfer Date,[ix] thereby giving it exclusive rulemaking and examination authority.[x]

These “enumerated laws” include:[xi]

• Alternative Mortgage Transaction Parity Act (AMTPA)[xii]
• Community Reinvestment Act (CRA)[xiii]
• Consumer Leasing Act (CLA)[xiv]
• Electronic Funds Transfer Act (except the Durbin interchange amendment) (EFTA)[xv]
• Equal Credit Opportunity Act (ECOA)[xvi]
• Fair Credit Billing Act (FCBA)[xvii]
• Fair Credit Reporting Act (except with respect to sections 615(e), 624 and 628) (FCRA)[xviii]
• Fair Debt Collection Practices Act (FDCPA)[xix]
• Federal Deposit Insurance Act, subsections 43(c) through 43(f)(12) (FDIA)[xx]
• Gramm-Leach-Bliley Act, sections 502 through 509 (GLBA)[xxi]
• Home Mortgage Disclosure Act (HMDA)[xxii]
• Home Ownership and Equity Protection Act (HOEPA)[xxiii]
• Real Estate Settlement Procedures Act (RESPA)[xxiv]
• S.A.F.E. Mortgage Licensing Act (S.A.F.E. Act)[xxv]
• Truth in Lending Act (TILA)[xxvi]
• Truth in Savings Act (TISA)[xxvii]
• Omnibus Appropriations Act– Section 626 (OAA)[xxviii]
• Interstate Land Sales Full Disclosure Act (ILSFDA)[xxix]

As I have discussed elsewhere, the Bureau would be assigned primary authority to enforce the aforementioned laws, but other federal regulators, including the Department of Housing and Urban Development (“HUD”), the banking agencies, and the Federal Trade Commission, would retain overlapping, secondary enforcement authority over certain requirements. State Attorneys General would be empowered to enforce federal laws under the Bureau (subject to any existing limitations in the laws to be transferred to the Bureau's authority).[xxx] And state consumer financial protection laws would not be preempted, except to the extent that they are inconsistent with federal law (although such state laws could be stricter than the federal laws, in which case they would not be preempted by federal law).[xxxi]

Opening a Dialogue: Elizabeth Warren and the Mortgage Industry

  Jonathan Foxx is the President and Managing Director of Lenders Compliance Group.

According to news reports, Elizabeth Warren will not be chosen as the Director of the Consumer Financial Protection Bureau (CFPB).

Since September 2010, Professor Warren worked diligently and reliably to "stand up" the CFPB in accordance with the specified requirements of the Dodd-Frank Act.

Whether or not Professor Warren remains with the CFPB in some capacity or moves on to other venues, the views and vision that she brought to the creation of the CFPB will likely remain the standard by which the CFPB will be judged to have served its mission.

With this in mind, I would like to share my just published interview with Professor Warren, entitled:

Opening a Dialogue: Elizabeth Warren and the Mortgage Industry

The article is published in the July 2011 edition of the National Mortgage Professional Magazine, which is available to you, compliments of the magazine. (A one year free subscription is offered.)

This interview, which includes questions posed by leading mortgage industry organizations, offers a deeper insight into how the CFPB's mission may affect state law, the mortgage industry, mortgage brokers, and even educational opportunities for mortgage loan originators.

The article also contains a section, entitled In Her Own Words, which provides additional insight into Professor Warren's views about consumer financial protection.

OPENING A DIALOGUE:
ELIZABETH WARREN
AND THE MORTGAGE INDUSTRY

As many in Congress seem bent on immobilizing the CFPB, it will be important to determine the extent to which the new agency lives up to the standards and mission which Professor Warren hoped it would achieve.

I want to take this opportunity to thank Professor Warren, her friendly and cooperative staff, and leaders of the many industry organizations that took part in this project. It was a pleasure working with you all.

CFPB: The Headless Horseman

COMMENTARY: by JONATHAN FOXX

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

At this writing, we are almost a week away from the Designated Transfer Date - the date on which the Consumer Financial Protection Bureau (CFPB) receives its enumerated authorities - and nobody has been chosen, appointed or nominated to head the new agency. Several suggestions for the principal position abound, primarily Elizabeth Warren.

How can such a monumental lack of political discipline, by Democrats and Republicans alike, be accounted for?

CFPB: Laws

The CFPB, created by the Dodd-Frank Act, on July 21st it will receive authority over:
-Alternative Mortgage Transaction Parity Act (AMTPA)
-Community Reinvestment Act (CRA)
-Consumer Leasing Act (CLA)
-Electronic Funds Transfer Act (except the Durbin interchange amendment) (EFTA)
-Equal Credit Opportunity Act (ECOA)
-Fair Credit Billing Act (FCBA)
-Fair Credit Reporting Act (except with respect to sections 615(e), 624 and 628) (FCRA)
-Fair Debt Collection Practices Act (FDCPA)
-Federal Deposit Insurance Act, subsections 43(c) through 43(f)(12) (FDIA)
-Gramm-Leach-Bliley Act, sections 502 through 509 (GLBA)
-Home Mortgage Disclosure Act (HMDA)
-Home Ownership and Equity Protection Act (HOEPA)
-Real Estate Settlement Procedures Act (RESPA)
-S.A.F.E. Mortgage Licensing Act (S.A.F.E. Act)
-Truth in Lending Act (TILA)
-Truth in Savings Act (TISA)
-Omnibus Appropriations Act- Section 626 (OAA)
-Interstate Land Sales Full Disclosure Act (ILSFDA)

In just a few days, the CFPB is going to have authority over the above-stated enumerated laws through rulemaking, orders, guidance, interpretations, policy statements, examinations, and enforcement actions.

The CFPB will be assigned primary authority to enforce the aforementioned laws, but other federal regulators, including the Department of Housing and Urban Development (HUD), the banking agencies, and the Federal Trade Commission, will retain overlapping, secondary enforcement authority over certain requirements. State Attorneys General will be empowered to enforce federal laws under the CFPB (subject to any existing limitations in the laws to be transferred to the CFPB's authority). State consumer financial protection laws would not be preempted, except to the extent that they are inconsistent with federal law (although such state laws could be stricter than the federal laws, in which case they would not be preempted by federal law).

CFPB: Products

The CFPB will have oversight over many financial products and services, including, but not limited to, credit extension; credit counseling; loan servicing; Credit Reporting Agencies, their agents and affiliates; real property leases; real estate settlement services; real estate appraisals; depository accounts; financial advisory services; exchange of funds and transmittal of funds; consumer custodial fund services; so-call "stored value cards;" check cashing; debt management, settlement, and collection services; payment processing services; and, a catch-all "other products and services" (as the CFPB so defines).

CFPB: New Offices

There will be various units and offices: a research unit to monitor the consumer financial products and services market, and a unit to collect and track complaints; three new offices to be established within one year of the Designated Transfer Date, an Office of Fair Lending and Equal Opportunity, an Office of Financial Education, an Office of Service Members Affairs; and, an Office of Financial Protection for Older Americans, which must be established within 180 days after the Designated Transfer Date. Furthermore, there will be a Private Education Loan Ombudsman to process complaints from borrowers of private education loans.

CFPB: Staff

In addition to the CFPB's responsibility to build its own staff and administrative operations, it will collaborate with the federal banking agencies and HUD to choose employees to be transferred from their agencies to the CFPB. All such employee transfers are to be fully effectuated not later than 90 days after the Designated Transfer Date.

CFPB: Director

The Director must establish all units and offices within specific time frames, include various coordinating and administrative mandates, provide for reporting requirements to Congress, and must see to it that the various components of the CFPB function through interacting participation within and across all CFPB units and, where applicable, certain federal and state agencies and regulators.

In addition to the foregoing, the Director must also establish the Consumer Advisory Board and appoint its members. By July 21st, as well as its receiving other authorities pursuant to Dodd-Frank, the CFPB must, among other things, conduct research relating to consumer financial products and services, develop its nationwide consumer complaint response center, plan and take steps to implement the risk-based supervision of non-depository entities, and prepare for the opening of outreach offices.

"You say yes, I say no / You say stop and I say go, go, go"  (Beatles)      

Whatever your political persuasion these days, it is irrefutable that this new agency is soon coming into its powers!

Some people believe that the Director should be industry friendly; others believe the Director should be consumer friendly. Does it occur to any of them that these predilections are not mutually exclusive?

Some legislators want to defund the CPFB or "defang" it (as one Congressperson has opined); others want it to have full funding and all the enforcement powers granted by Dodd-Frank.

But defunding an agency that is set to receive all the enumerated laws is entirely counterproductive, inasmuch the industry will depend on it for oversight of these laws. And the CFPB, as required by Dodd-Frank, that is deprived of enforcement powers is virtually no agency at all: this is to "defang" it without regard for the consequences.

Every compliance officer knows that compliance means nothing without enforcement!

"I say high, you say low / You say why, and I say I don't know" (Beatles)

We all know that the President cannot make a recess appointment if Congress is not in recess, notwithstanding the "pro forma sessions" that may be conducted in order to keep the Congress "in session." Essentially, the tactic is for opposition legislators - primarily Republicans - to prevent an appointment of anybody at all to the CFPB unless the CFFB is changed.

As to confirming an appointment, at this time the President has put forth almost 300 civilian appointments this year, but fewer than 100 of them have been confirmed by the Senate - and these are instances where there is no opposition! Indeed, there are 15 judge nominees who have already been unanimously approved by the Senate Judiciary Committee, but their nominations have not even been sent to the floor of the Senate.

Importantly - and, at this late date, inexplicably - President Obama has not even announced his choice for the Director! How can consumers or industry expect congressional action when the President himself won't choose?

At this time, Elizabeth Warren is standing up the CFPB. She is the very person who devised the idea of a consumer financial protection agency and then advocated in the halls of Congress, in speeches, lectures, and interviews throughout the United States, for its creation. Since September 17, 2010, she has been building the CFPB in accordance with the requirements of Dodd-Frank.

While proponents and opponents lambast each other, and a Director is not appointed, the stakes for the mortgage industry continue to grow ever higher and perilous. The many enumerated laws being fully empowered into the CFPB on July 21st affirmatively require substantive, continuous, and very careful oversight.

The individual who manages that agency matters!

Headless Horseman      

• "The dominant spirit, however, that haunts this enchanted region, and seems to be commander-in-chief of all the powers of the air, is the apparition of a figure on horseback, without a head. It is said by some to be the ghost of a Hessian trooper, whose head had been carried away by a cannon-ball, in some nameless battle during the Revolutionary War, and who is ever and anon seen by the country folk hurrying along in the gloom of night, as if on the wings of the wind."

    - Washington Irving, "The Legend of Sleepy Hollow"

The principal character in "The Legend of Sleep Hollow" is Ichabod Crane, a school teacher. Sleepy Hollow is believed to have been located in the area of Tarrytown, NY. Ichabod is killed quite dramatically when the headless horseman, a ghost - and it is believed that ghosts can't cross water! - throws his severed head across a bridge, over the water, and hits poor Ichabad off his horse. The next morning, Ichabod's hat is found nearby, and beside it is a shattered pumpkin. Ichabod was never seen in Sleepy Hollow ever again. In Irving's story, one is led to conclude that the headless horseman was really no ghost at all, but Abraham van Brunt (aka "Brom Bones"), Ichabod's rival for the hand in marriage of Katrina van Tassel, the beautiful daughter of a rich farmer.

Any agency without a head is crippled, but, given the mandates arrogated to the CFPB, not to have a Director immediately is especially debilitating to consumers and mortgage industry participants alike.

Instead of being rivals, like Ichabod Crane and Brom Bones, it is in the interest of both consumers and industry to lobby for a strong CFPB, under the direction of a wise, knowledgeable, and experienced leader.

This is not a job for a career bureaucrat. It requires a Director with considerable managerial, legal, political, and financial knowledge, all of which ideally would be expressed through a balanced temperament, a focused and incisive mind, a fierce consumer advocacy, and sophisticated communication skills.

It seems that Sleepy Hollow has relocated to the Congress of the United States.

What do you think?

I would welcome your comments.

Combining the GFE and TIL Disclosures

COMMENTARY: by JONATHAN FOXX

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

The Consumer Financial Protection Bureau (CFPB) announced on May 18, 2011 that it has created two alternative prototype forms that are designed to combine the consumer disclosures required by the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The creation of a combined form is required by the Dodd-Frank Act.

The CFPB will use the prototypes in a testing process that will last several months in preparation for the agency's formal proposal of a single form. The agency said that it plans five rounds of evaluation and revision before settling on a final form, and the process will use forms in both English and Spanish.

The prototypes both offer disclosures for a $216,000 adjustable rate mortgage loan. They combine the disclosures required by the current RESPA Good Faith Estimate of Closing Costs and the current TILA disclosures in two-page formats. By selecting the right options, it is possible not only to review the two prototypes but also to comment on which of the two is better and why. The CFPB's webpage also offers separate comment possibilities for consumers and industry participants.

The testing and public feedback process will enable the CFPB to revise the design and refine the content based on how it works for consumers to develop a single form that will officially replace the dual TILA and RESPA disclosure requirements.

The purpose of combining and simplifying the GFE and TIL is to reduce the regulatory burden on mortgage lenders.

Twofer

According to the CFPB, "the feedback process we're starting today is one of the first steps in combining the Truth in Lending form and the Good Faith Estimate into a single, simpler disclosure form."

The new form will consist of two pages. Page one provides an overview of the costs related to the origination of the loan and the monthly payment the consumer can expect, as well as whether or not the amount of that payment will change over time. Page two offers a more detailed explanation of the cost breakdown.

With respect to the prototype forms proffered, here are the questions about which the CFPB requests consideration:

• Would this form help consumers understand the true costs and risks of a mortgage?
• Could lenders and brokers clearly and easily explain the form to their customers?
• What would you like to see improved on the form? 
• Is there some way to make things a little bit clearer?

Learning from the Mortgage Industry

What is interesting about the CFPB's approach to this major overhaul is its forthright attitude. In offering the new form for industry evaluation, its announcement states that:

"at the heart of our work is the idea that the consumer financial product and services market should work for you. We think we should learn from you what you want to see. One of the best ways to do that is also the simplest: we're asking."

For industry participants accustomed to being told what to do, not asked, this is a welcome attitude. Even when regulators have asked industry members for comments, as a requirement of statutory authority and rulemaking, often most comments are not adopted, adapted, or, in some cases, even acknowledged.

But it should be noted that this is only a first step in a process that will last several months. The testing phase of the disclosure prototypes will take place over the next several months and involve one-on-one interviews with consumers, lenders, and brokers. 

CFPB expects to conduct five rounds of evaluation and revisions through September 2011. Initial rounds of testing will include both English and Spanish language versions. Interviews will be conducted in six cities: Albuquerque, New Mexico; Baltimore, Mary land; Birmingham, Alabama; Chicago, Illinois; Los Angeles, California; and Springfield, Massachusetts.

Yet, the CFPB lets us know, even though the process will take some time, "there will be more opportunities to weigh in as we move forward."

What this suggests is that the industry would do well to assist, rather than to resist, the type of cooperation that the CFPB wants to encourage. Ultimately, what is good for the consumer is good for the industry - that is a concept that the industry itself has always maintained as central to its mission.

Option A or Option B  

Of course, commentators will bring their own ideas about the way the form should be designed. Such participation is very important.

Many will look to extrapolate the existing ways of disclosing on the currently separate GFE and TIL disclosures into the new CFPB combined form. That also is needed and valuable.

However you view it, contributing to the process is much better than sitting on the sidelines without an opinion - or not expressing it when given the opportunity.

Library

Proposal to combine GFE and TIL Disclosures (Option A and Option B)
(5/18/11)
GFE and TIL: Option A
GFE and TIL: Option B

CFPB: Announces Website

On February 3, 2011, the U.S. Department of the Treasury announced the launch of a ‘beta’ Consumer Financial Protection Bureau (CFPB) website, ConsumerFinance.gov, the stated purpose of which is to provide "a critical link to the American public for soliciting ideas on the bureau's creation and priorities and for answering questions on its work." 

WEBSITE STRUCTURE

• Blog
• The Bureau
• Protecting you
• Get help now
• Suggest
• Receive Updates
• Small Financial Services Providers
• Protecting You

Selected Sections

Open for Suggestions

• For use by consumers, businesses, and anyone who is interested in making consumer financial services markets work better for everyone.

• This feature encourages communication directly with the CFPB implementation team through YouTube video questions, but suggestions can also be accepted through e-mail and other forms of online communication.
• Comments from the public will help the CFPB implementation team understand what consumers and financial services providers need and will inform the work of the bureau.

Interactive Display of Elizabeth Warren's Daily Calendar

• One of the items most frequently-requested by the public is Elizabeth Warren's calendar.

• The CFPB implementation team has put her calendar online in an interactive, clickable format.
• Users can explore who Warren is meeting with and hearing from through the online tool, or they can download the iCal feed, subscribe via RSS, or view the calendar as a FOIA-compliant PDF file.

Additional Resources

• Selected financial education materials provided by other government agencies.
• Tool for determining the agency with current authority for overseeing different providers of financial products and services (so that consumers can find help with their financial problems with the responsible agency while the CFPB is getting underway).

SOCIAL MEDIA LINKS 

Individuals can follow CFPB on several social media sites:

Facebook

Twitter

YouTube

Flickr

Visit Library

Treasury Department Announces Launch of 'Beta' Consumer Financial Protection Bureau Website - Press Release
February 3, 2011

CFPB: Signs Memorandum with CSBS

On January 4, 2011, the Treasury issued a Press Release, entitled:

Federal Consumer Agency to Partner with State Regulators on Supervision of Providers of Consumer Financial Products and Services, Including Mortgage Lenders, Private Student Lenders and Payday Lenders

According to the Press Release, the Consumer Financial Protection Bureau (CFPB) and the Conference of State Bank Supervisors (CSBS) signed a Memorandum of Understanding (MOU) that sets forth an initiative for state regulators and the CFPB to endeavor to "promote consistent examination procedures and effective enforcement of state and federal consumer laws and to minimize regulatory burden and efficiently deploy supervisory resources."

I have covered the CFPB since its inception as a potential agency to its actual creation through the Dodd-Frank Act. If you want to read some background, please feel free to visit our Library and download these articles.

• Part III: Consumer Financial Protection - Bureau and Bureaucracy (10/10)

• The CFPA Controversy: Asking the Tough Questions (10/09)

• The Birth of an Agency (Consumer Financial Protection Agency) (09/09)

Or visit our general Archive for the compliance updates.

The MOU also provides that "state regulators and the CFPB will consult each other regarding the standards, procedures, and practices used by state regulators and the CFPB to conduct compliance examinations of providers of consumer financial products and services," including non depository mortgage lenders, mortgage servicers, private student lenders, and payday lenders.

In the Press Release, Elizabeth Warren, the Special Advisor to the Secretary of the Treasury on the CFPB, stated: "This agreement allows us to bring thousands of financial service providers out of the shadows and to begin the process of ensuring that all lenders comply with the same basic rules."

And Thomas Gronstal, Chairman of the CSBS, stated: "The formalized coordination between the states and the federal government established by the MOU will do much to create a comprehensive and seamless system of financial supervision and is a step toward a more cooperative system of supervision, which will benefit consumers and financial services providers alike."

Essentially, the MOU outlines three areas of cooperation:

1) Promoting consistent examination procedures and enforcement of state and federal consumer laws;

2) Minimizing regulatory burden and efficiently deploying supervisory resources; and,

3) Consulting each other regarding the standards, procedures, and practices used to conduct compliance examinations of providers of consumer financial products and services, including non-depository mortgage lenders, mortgage servicers, private student lenders, and payday lenders.

Best wishes,

Jonathan Foxx

Visit Library for Issuance

Memorandum of Understanding: CFPB and CSBS Press Release
January 4, 2011

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.

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.

CFPB: First FEDERAL REGISTER Issuance

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.

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A new era in residential mortgage loan originations has now begun with the issuance of the announcement of a designated transfer date for transferring specific enumerated authorities from the purview of other agencies to the Consumer Financial Protection Bureau.

Our firm has issued Mortgage Compliance Updates and Compliance Alerts relating to the mortgage reform act. We have also opened a new section in our Library for the CFPB, and if you want to read the legislation, that too is available in our Library.

And, as many of you know, I have written extensively on the new mortgage reform legislation and will continue to do so.

You might want to read the following articles, all published in the National Mortgage Professional Magazine, the nation's highly respected magazine devoted to mortgage banking:

• The Birth of an Agency: Consumer Financial Protection Agency
  • (September 2009 Edition)

• The CFPA Controversy: Asking the Tough Questions
  • (October 2009 Edition)

• Landmark Financial Legislation: New Rules for Mortgage Originators - Part I: Reformation and Regulations
  • (August 2010 Edition)

• NOTE: Part II - forthcoming this month in the September edition. Part III - forthcoming in the October edition.

On September 17, 2010, President Obama appointed Elizabeth Warren as an Assistant to the President and a Special Adviser to the Treasury Secretary, with responsibility to establish the CFPB.

Elizabeth Warren was not named the first Director (a five year post that requires Senate confirmation). Given her unique abilities, and the support of the President and Treasury Secretary, there is every reason to believe that she will bring insight, energy, and fairness to the position entrusted to her.

Overview

On September 20, 2010, the very first issuance regarding the Bureau of Consumer Finance Protection (CFPB) was published in the Federal Register.

In accordance with the Consumer Financial Protection Act of 2010 (CFP Act), the Secretary of the Treasury, Timothy Geithner, designated July 21, 2011 as the date for the transfer of functions to the CFPB.

On July 21, 2010, the President signed into law the CFP Act (i.e., Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act). Section 1062 of the CFP Act, in relevant part, requires the Secretary to designate a single calendar date for the transfer of functions, under section 1061, to the CFPB.

Therefore, on the ''designated transfer date'' of July 21, 2011, certain authorities will be transferred from other agencies to the CFPB, and the CFPB will be able to exercise certain additional, new authorities under the CFP Act and other laws.
Henceforth, we will be tracking CFPB announcements and issuances as well as any Treasury issuances pertaining to the CFPB.

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If you have any questions about this matter,

please email me.

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Highlights

Orderly and Organized Start-Up

• Congress contemplated that the lead time for the ''orderly implementation'' of the CFPB's functions could range between 6 to 18 months after the date of enactment.

• To fulfill the statutory goal of an ''orderly and organized startup'' of the new agency, the CFPB should be provided a reasonable period of time to develop its operations and organization prior to the transfer of functions and employees from other agencies.

• A transfer date of July 21, 2011, 12 months after the date of enactment, will provide the CFPB an appropriate period of time to hire and assign employees to support its new functions, as well as to plan and make important decisions necessary to build a strong foundation for the new agency.

Functions of the CFPB

• On July 21, 2011, the ''consumer financial protection functions'' currently carried out by the Federal banking agencies, as well as certain authorities currently carried out by the Department of Housing and Urban Development (HUD) and the Federal Trade Commission (FTC), will be transferred to the CFPB.

• As of July 21, 2011, the CFPB will assume responsibility for consumer compliance supervision of very large depository institutions and their affiliates and promulgating regulations under various Federal consumer financial laws.

• Within 90 days after July 21, 2011, the transfer of certain employees from six of those agencies to the CFPB must also occur.

• Effective July 21, 2011, new authorities of the CFPB under subtitle C of the Act, as well as other consumer protection provisions, will become effective.

Intervening Period

• In the intervening period, the CFPB will lay the groundwork for an efficient transfer and prepare for consumer protection activities after July 21, 2011.

• For instance, prior to July 21, 2011, the CFPB will:

• begin to conduct research relating to consumer financial products and services,
• develop its nationwide consumer complaint response center,
• plan and take steps to implement the risk-based supervision of non-depository covered persons, and
• prepare for the opening of outreach offices.

• Development of the supervision program for certain non-depository covered persons is particularly significant because no Federal agency previously has had the responsibility of supervising these entities, such as payday lenders, mortgage companies, debt collectors, and consumer reporting agencies.

• Prior to July 21, 2011, the CFPB will begin building the supervision program, including hiring and training examination staff and making preparations necessary to begin a risk-based supervision program.

The CFPB will also work during the intervening period to prepare for the new authorities that will transfer or take effect as of July 21, 2011, for instance by planning the orderly integration of bank, thrift, and credit union examiners from five different Federal agencies and preparing for rulemakings required under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Visit Library for Issuance

CFPB: Designated Transfer Date
Federal Register, Vol. 75, No. 181
September 20, 2010

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.

Appointing a Director to the CFPB

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.

Many clients and colleagues have asked me why it is that a Director for the newly legislated Consumer Financial Protection Bureau (CFPB) has not been appointed by this point. After all, the financial reform legislation became the law of the land on July 21, 2010. It is now over two months later and there is still no appointment to that post.

The reason for the delay can be given in one word: politics.

At this point, there really is no excuse for the usual cover story that explains such delays - "getting it right" in finding the most qualified person.

Would you think that the person is qualified who actually initiated the concept of the CFPB and has advocated for its implementation all along - before the politicians got their hands on the idea? Would somebody who has been a consistent public voice for consumer protection advocacy be qualified?

How about an individual who has published numerous scholarly articles, and teaches contract law, bankruptcy law, and commercial law at Harvard Law School - and has taught law at several top law schools - is that a decent enough credential? Indeed, somebody whose legal expertise and experience have led to being considered a nominee to serve as a Supreme Court Justice, for the position previously held by Justice John Paul Stevens (and now held by Justice Elena Kagan) - that kind of legal skill and integrity - would that qualify?

Given the "mortgage meltdown" and Wall Street's financial fiasco, what about choosing the person who actually is the chair of the Congressional Oversight Panel, charged with investigating the Troubled Asset Relief Program (otherwise known as "TARP," and otherwise known as the "Bailout")? Maybe somebody willing to challenge the U. S. Treasury Department's handling of the Bailout and demanding more accountability?

Maybe a mature person of 61 years of age, somebody who is not an ivory tower scholar, having grown up in Oklahoma, attended non-Ivy League colleges, and received a JD from Rutgers University? Think about a person who has been the Vice President of the American Law Institute as well as a former Sunday School teacher.

That person is Elizabeth Warren.

Only one problem: politics. Inscrutable politics.

For instance, the retiring Senator Christopher Dodd (D-CT), who led the Senate's work on the financial reform legislation, has been making statements that indicate an unwillingness to understand or accept his own law. That law, eponymously named after him and his cohort in the House, Barnie Frank (D-MA), provides for an Interim Director, appointed by the Treasury Secretary - and the appointment does not require the Senate's approval. Yet Senator Dodd has said that such a power is not in the new law and the Senate's approval is required. Maybe he should read what he signed!

The Dodd-Frank Act's Title X, Subtitle F - "Transfer of Functions and Personnel; Transitional Provisions," Sections 1066 (a) and (b), inter alia, specifically state that the Treasury Secretary is "authorized to perform the functions of the Bureau" and may provide "administrative services necessary to support the Bureau before the designated transfer date" of the many regulatory authorities to it.

In other words, the Treasury Secretary runs the Bureau until such time as the Bureau runs itself as an agency within the Treasury, and therefore the Treasury Secretary has the authority to appoint an Interim Director. An Interim Director appointment would likely lead to a permanent Director position, but, given the spectacle of DC politics recently, that may also lead to yet another partisan blockade or filibuster.

So why not get started right now?

Meanwhile the public is waiting and wondering.

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So, What Do You Think?

I would welcome your comments and views.

Please feel free to email me at any time.

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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.