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Fri Aug 16, 2013, 09:25 AM

Elizabeth Warren op-ed slams attempt to roll back CFPB mortgage rules. [View all]

'Consumer Mortgage Choice Act' Takes Away Consumers' Choices

Maxine Waters and Elizabeth Warren

It has been only three years since the passage of the Dodd-Frank Act and five years since the 2008 financial crisis, but memories in Washington can be short.

Even though we are still emerging from a foreclosure crisis that has affected tens of millions of American families, some in Congress are already pushing to weaken new rules designed to protect taxpayers and keep consumers safe from the faulty mortgage products that wrecked the economy.

The latest danger is H.R. 1077 and its companion bill, S. 949. Deceptively entitled the "Consumer Mortgage Choice Act," the bills seek to undermine Dodd-Frank’s ability-to repay provision. This provision, one of the most direct and important responses to the mortgage crisis, requires lenders to determine whether a borrower can afford a mortgage before they extend a loan. The rule was adopted to prohibit loans that were "designed to fail," a practice that was central to the origination model that brought on the financial crisis. Under the new rule, if lenders offer loans that meet the qualified mortgagestandards provided by the Consumer Financial Protection Bureau , they are presumed to have proven the borrower’s ability to repay and are therefore protected from litigation.

One of these standards is a cap on points and fees, the up-front cost of getting a loan, at 3% of the loan amount. H.R. 1077 and S. 949 would create significant exceptions to this, allowing many more high-cost loans to qualify as QM loans.

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Dems Defy Obama on Mortgage Protections

Twelve Democrats in the House and Joe Manchin in the Senate have cosponsored bills that would gut new protections on home loans.

—By Erika Eichelberger

Last week, President Barack Obama laid out his new housing plan, emphasizing the importance of safe, simple, affordable mortgages. But lawmakers in his own party are working against him, trying to gut historic new safeguards on home loans.

A new mortgage rule issued by the Consumer Financial Protection Bureau (CFPB) that takes effect January 1 limits fees on new home loans to three percent. The regulation is "one of the most direct and important responses to the mortgage crisis," Sen. Elizabeth Warren (D-Mass.) and Rep. Maxine Waters (D-Calif.) argued in a recent editorial in American Banker. But 12 House Democrats and Sen. Joe Manchin (D-W.Va.) have joined with Republicans to cosponsor bills that would eviscerate the new cap and clear the way for lenders to steer Americans into riskier, higher-cost loans.


The whole point of the CFPB rule is "to make sure that brokers are more likely to work in the interest of homeowners," says Alys Cohen, a staff attorney at the National Consumer Law Center (NCLC). The bills—backed by Democratic Reps. Gregory Meeks (D-N.Y.), William Lacy Clay (D-Mo.), Gary Peters (D-Mich.), David Scott (D-Ga.), Mike Quigley (D-Ill.), Bill Owens (D-N.Y.), Sanford Bishop (D-Ga.), Gene Green (D-Texas), Jim Matheson (D-Utah), Filemon Vela (D-Texas), Sheila Jackson-Lee (D-Texas), and David Loebsack (D-Iowa)—could re-create the pre-crisis state of affairs.

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The Consumer Financial Protection Bureau gets busy

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