On the heels of Director Cordray’s remarks about the CFPB’s focus on debt collection Deputy Director Raj Date spoke to mortgage industry members at MBA’s National Secondary Market Conference in New York City on May 7, 2012 and reminded the industry that “the place we’re spending most of our time is the mortgage market.”

Mr. Date’s remarks were tailored to an audience that “is probably the most keenly aware of how U.S. consumer finance markets work – and how it is that they don’t work.” Date specifically mentioned several key initiatives, including the TILA/RESPA integrated disclosure, addressing yield-spread premiums and the practice of brokers being “paid more to give borrowers a bad deal”, and the ability-to-repay rule, which Date said he was “confident” would be finalized before the January deadline. The majority of Date’s remarks, however, centered around broader concepts of “fairness”, “transparency”, and “common sense”, which are the Bureau’s common themes across all asset classes. Date stressed the importance of an even playing field by stating that, “If you want to be in the business of consumer finance, then you’ve got to play by the same rules as everybody else.” 

Knowing his audience, Mr. Date made clear that “there is nothing inherently wrong with risk,” and that “risk is why you get paid.” He went on to say, however, that “nobody should get paid for taking risk that they can’t understand, they can’t rank, they can’t quantify, or they can’t price”. Going further, in perhaps his most direct moment in his remarks, Date said, “Your market – the secondary mortgage market – should work like every other competitive market in the economy. If you are smart and take risks, then you should get paid. But if you are taking bad risks, then you shouldn’t get paid. For too long, we lived in a mortgage marketplace where people were able to take bad risks and get paid anyway.”

The CFPB’s proposals dealing with the initiatives described by Mr. Date are expected to be issued this summer. To finalize those proposals by January, as Mr. Date is “confident” the CFPB will do, means that the CFPB will have limited time to consider the avalanche of comments the proposals will likely generate. We will be working with clients to identify the most significant areas on which to focus their comments.