Now overseeing bank and non-bank segments of the mortgage market, the Consumer Financial Protection Bureau is looking to level the playing field, CFPB Chief Richard Cordray told members of the Independent Community Bankers Association this week.
Leading up to the housing crisis, bad practices drove out the good, Cordray said in prepared remarks.
“Your banks were literally robbed of market share; and the whole stinking mess eventually collapsed, dragging down many innocent people along with it,” he said. “I firmly believe that had the Consumer Bureau been in place ten years ago, the crisis would have been headed off before it metastasized.”
Consumers’ ability to go to one community banker and get a loan where another would turn down that same loan is a practice that should have been avoided, Cordray said. The CFPB will work toward that goal, he added.
“Under our authorizing statutes, we do not enforce the law against community banks. We do not examine community banks. But we do write rules that can affect the community banks. Over the next year, the Consumer Bureau is required to adopt new mortgage rules that protect consumers. One of our most important rulemakings will implement a new statutory requirement that lenders make a good faith and reasonable determination that a borrower can repay the mortgage.”
Small banks will be acknowledged for their size and are not being scapegoated for the crisis, however, according to the CFPB.
“As we work to clean up the mess that the crisis created, we must be mindful of the fact that community banks were among those most harmed by the mortgage frenzy, the ensuing credit crunch, and the deep recession that cratered our local economies,” Cordray said.
Written by Elizabeth Ecker