Cordray’s first target: The housing crisis
Cordrays first target: The housing crisis
Posted by Suzy Khimm
Despite the controversy surrounding his appointment, Richard Cordray is barreling ahead with his work as head of the new Consumer Financial Protection Bureau and hes starting with the very event that led to the creation of his agency: the housing crisis.
On Wednesday, the new bureau released its guidelines for regulating the practices of mortgage lenders across the country. Regulators are instructed to examine whether lenders offering subprime loans, for example, closely assess whether potential borrowers are actually able to repay the loans and factor in the risks accordingly. The CFPB will also determine whether lenders misrepresent the terms and conditions of their loans another practice that helped contribute to massive defaults warning them to avoid using fine print, separate statements, or inconspicuous disclosures to correct potentially misleading headlines.
The CFPB had already rolled out a public education campaign, Know Before You Owe, to improve financial literacy on the consumer side as well before Cordray officially took office last week. But Obamas recess appointment unleashed the watchdogs full enforcement authority. Over the past few days, the CFPB also launched its first known investigation into a financial firm, probing kickbacks that were allegedly paid to PHH Corp., a private mortgage lender.
On the flip side, theres serious concern that this extra scrutiny from the CFPB could make banks and other financial firms more anxious about making loans to potential homebuyers. As a result, the additional regulation might conceivably tighten up credit at a time when more activity is needed, exacerbating problems in a housing market thats still recovering from the 2008 crisis.
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http://www.washingtonpost.com/blogs/ezra-klein/post/first-on-cordrays-agenda-the-housing-meltdown/2012/01/12/gIQAWzHKuP_blog.html