WASHINGTON–Ongoing legal challenges to the authority of the CFPB and even its very existence could hurt the stability of the U.S. housing market and broader consumer protections, according to the Bureau’s director, Rohit Chopra.
Speaking to the Mortgage Collaborative National Conference, Chopra pointed to current challenges to its payday lending rules as well as the constitutionality of how the agency is funded. A payday loan industry lawsuit is expected to come before the Supreme Court this fall over that very issue.
“The case involving the CFPB has significant implications for the entire housing finance and financial regulatory system,” Chopra told the meeting. “The CFPB is just one part of that structure, and we are not the only agency funded this way. Any doubt about the legitimacy of the CFPB could be destabilizing.”
He also cited a Supreme Court brief filed by the Mortgage Bankers Association (MBA) that argues that calling into question CFPB rules could have “potentially catastrophic consequences on the mortgage and real-estate markets.”
Decade of ‘Guideposts’
The MBA brief further states that “virtually all financial transactions for residential real estate in the United States depend upon compliance with the CFPB’s rules, and consumers rely on the rights and protections provided by those rules,” Chopra added.
“Lenders, servicers, and consumers have operated by the CFPB’s guideposts for more than 10 years, and without those rules substantial uncertainty would arise as to how to undertake mortgage transactions in accordance with federal law,” Chopra said, adding that turning back to a system that existed before the financial crisis 15 years ago without the agency’s regulations “would create uncertainty for the mortgage industry and the economy.”
‘Living Under Mystery’
“And even putting aside the questions about existing rules, moving to a world where the future of housing finance oversight is uncertain and unknown, including the number of years we would be living under such mystery, should raise serious shared trepidations among market participants, financial markets, and consumers alike,” he told the meeting.
He added that “Questions about those rules and the ability of the system to adapt to immediate and future challenges would raise significant concerns for the stability of the housing market and the financial system more broadly.”
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