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CFPB Wants to Hit Regulatory Sweet Spot in Mortgage Lending

Complicated loan documents are increasing compliance costs for lenders and making the mortgage process confusing for consumers, said the leader of the Consumer Financial Protection Bureau on Wednesday.

During testimony before the House Financial Services Committee, Elizabeth Warren, special assistant to the president, said the agency aims to simplify and bring transparency to mortgage lending by hitting a regulatory “sweet spot.”

“The consumer bureau is working to eliminate some of the confusing and duplicative paperwork that consumers receive during the home loan process, moving toward a much simpler, shorter document that clearly spells out the information that consumers need when making the important decision to take out a mortgage,” said Warren. “We want to hit a regulatory sweet spot—more value for the borrower and lower costs for the lender.”

Warren acknowledged that paperwork required by law is complicated and expensive for the lender to fill out, and there are “real regulatory compliance costs associated with every loan.” Questionable practices from mortgage servicers have also demonstrated the need for a “new cop on the beat.”

“Currently, our team is working with federal and state regulators to lay the groundwork for coordination in the regular examination of mortgage servicers. Notably, Congress authorized the CFPB to be the first federal agency with the authority to monitor and regulate all major mortgage servicers, including both bank and non-bank companies,” Warren said.

“If there had been basic rules of the road in place for mortgages, consistently enforced at the federal level by an agency fully accountable for protecting consumers, the current economic crisis would not have developed in the way it did.”