The American Association of Residential Mortgage Regulators (AARMR), the trade association for regulators responsible for supervising non-depository mortgage companies, held its annual conference last week in Denver. Not surprisingly, the agenda was heavily focused on the CFPB, and several CFPB officials were in attendance. Unfortunately, the officials, knowingly or not, adhered to the CFPB’s (unofficial?) stance of being unwilling or unable to answer questions or provide guidance regarding the various rules that become effective in January 2014 (and certain rules for which the CFPB inherited authority) – guidance that both the industry and the state regulators desperately need. To be clear, while the officials were generally willing to entertain questions, the responses to those questions generally lacked the detail or insight that is needed.
Interestingly, none of the CFPB officials in attendance were from the policy side; rather, they were from the CFPB’s enforcement and supervision groups. While attendees did not gain any insight into where the CFPB may end up on the various rules and the many important open questions, Edwin Chow, the CFPB’s Director of Enforcement for the West Region, did share some interesting information regarding upcoming enforcement actions. As we blogged about previously, the CFPB has sued a mortgage lender and two of its loan officers for allegedly violating the LO Compensation Rule. During one of the conference sessions, a state regulator thanked the CFPB for providing some definitive guidance, through their recent lawsuit, regarding compensation plans that the CFPB believes violate the LO Compensation Rule. In addition to thanking the CFPB, the regulator implored the CFPB to provide further guidance that both regulators and the industry can rely upon. In response to those comments, Mr. Chow noted that there were a number of enforcement actions in the pipeline related to loan originator compensation plans.
While clarity from the CFPB with regard to the various rules for which the CFPB is responsible is appreciated and necessary, doing so through enforcement actions rather than through formal and informal guidance upon which the industry and regulators can rely is certainly less than ideal. It is helpful to know that the CFPB is focused on loan originator compensation plans, but given the CFPB’s refusal to issue any formal guidance on the LO Compensation Rule, the industry (and regulators) will have to wait for the enforcement actions to play out to understand where the CFPB is coming down on certain aspects of the LO Compensation Rule.
With slightly less than 5 months to go until the most significant regulatory changes in the history of the mortgage industry become effective, guidance, clarity and direction from the CFPB is critical and, in many respects, overdue. While we wait for that guidance, clarity and direction, it appears that enforcement actions with regard to existing rules may be all the industry can look to for insight into how the CFPB will deal with their new rules.