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In a series of internal documents that were reviewed by American Banker, Consumer Financial Protection Bureau officials repeatedly acknowledge its methodology could overcount the potential discrimination by firms, but say they prefer that to the alternative where bias is underestimated.
September 17 -
Banks want all loans held in portfolio to be classified as ultrasafe regardless of the underwriting characteristics or of a bank's asset size. But consumer activists and independent mortgage lenders are raising red flags ahead of possible Senate Banking action.
May 1
WASHINGTON – The House passed two controversial regulatory relief bills Wednesday evening ahead of the looming yearend budget fight.
The first bill would provide banks a safe harbor from requirements under the Consumer Financial Protection Bureau's "qualified mortgages" for all loans held in portfolio. Supporters argue that loans held on a bank's books are typically more conservative and the change would help expand access to credit. The bill passed 255-174.
But critics, including the White House, have said the bill would allow banks to engage in reckless lending and lead to more defaults than under the current rules. Sen. Elizabeth Warren, D-Mass., has warned that the bill is really a concession to big banks disguised as regulatory relief for community banks.
The House also approved legislation that would rescind the CFPB's 2013 guidance designed to protect consumers seeking an auto loan from discrimination based on race and other factors. The guidance directed lenders to change how they compensate dealers in order to avoid fair-lending allegations based on interest rate markups.
While supporters of the CFPB's guidance say that it helps protect minority buyers, critics argue it is based on a flawed methodology and provides a backdoor opportunity for the CFPB to regulate auto dealers, who are statutorily exempted from oversight. The legislation would send the CFPB back to the drawing board, directing the agency to study the issue further and consult with other regulators. The legislation passed 332-96.
It is unclear whether Republicans will try to insert either the mortgage or auto lending provisions into a final budget package that is due for consideration in the coming weeks. The two measures received some Democratic support, but the White House has threatened to veto both. Whether the proposals can slip through as part of a larger package remains to be seen.
Lawmakers were also debating late Wednesday a third financial bill that would impose new restrictions on the Federal Reserve Board. The legislation would require the central bank to use a mathematical formula to determine interest rates and give Congress and the Government Accountability Office oversight of the Fed's monetary policy. Under the bill, the Fed would also have to follow stringent cost-benefit analysis requirements. The White House and Fed Chair Janet Yellen have both spoken out against the bill, but it was expected to pass largely with Republican support.
