Part III of a Three-Part Series on Financial Reform Legislation
Dodd-Frank: Legislation - Reactive or Proactive
Author:
Jonathan Foxx
Published in
National Mortgage Professional Magazine
First Published: October 2010
Although Elizabeth Warren has left the Consumer Financial Protection Bureau, her views continue to provide inspiration to its management and staff. Perhaps it would be wise to read the article I wrote last October, outlining the CFPB, its mandates, and its prospects.
__________________________________________
Society is founded not on the ideals but on the nature of man
and the constitution of man rewrites the constitutions of states.
But what is the constitution of man?[i]
Will and Ariel Durant
In the first two parts of this 3-part series,
[ii] we have explored the basic structure of the new financial reform law, known as the Dodd-Frank Act (“Act”), as it affects residential mortgage loan originations.
[iii] We have already given consideration to the many mortgage loan regulatory provisions that the Act covers
[iv] and especially to the Mortgage Reform and Predatory Lending Act, a primary component of this landmark financial legislation.
[v]
Now, we will turn our attention to the very core of the Act itself vis-à-vis the mortgage industry and consumer financial protection: the Bureau of Consumer Financial Protection (known also as the “Consumer Financial Protection Bureau,” or “CFPB,” and hereinafter as “Bureau”).
[vi]
But first, a Thought Experiment.
[vii]
A vast, entangled array of very small and sleek wires, super strong magnets, and very wide and long cables extend out omnidirectionally – all of which lines and circuits are laid throughout a network of interlocking, electrically generated devices that are held in place in their respective positions on a shaky iron scaffold by fraying, single-knotted ropes. The devices are needed to power vital and critical services to a community. But, due to wear and tear on their bindings, some devices are about to break free, threatening to pull down with them the entire array of wires, magnets, cables, and other devices. Any device can plummet at any time. Before it is too late, all the lines must be disentangled, traced to each of the devices, and rerouted to a new and more stable grid; plus, the devices themselves must be transferred, one by one, to the new grid without damaging them, and then reconnected to their lines. But the collapse can take place at any time. A “crisis” looms!
So, how are you going to accomplish this heroic task quickly and effectively?
Now let’s consider this analogue: the energy source is Constitutional authority; the grid is the financial regulatory framework; wires and cables are the ways and means that implementing regulations affect one another; magnets are the legal foundations (i.e., case law precedents (stare decisis), statutes (federal and state), Constitutional laws or rights) on which all subject enumerated laws (see below) rest; devices are the existing regulations; and ropes are the various governmental agencies that are charged with enforcement of and monitoring compliance with specific implementing regulations.
By the end of this article, I hope you will have decided how best to solve the above-described and admittedly convoluted “crisis.” This article and the preceding articles in this series outline how Congress decided!
Please keep in mind that this series on the Dodd-Frank Act is meant to provide an overview. However, the legislation itself is extremely detailed and extensive. Therefore, for guidance and risk management support, I strongly recommend that you consult a risk management firm, residential mortgage compliance professional, or regulatory counsel to develop policies and procedures to implement the Act’s requirements.
One Bureau, Many Bureaucrats
Nothing is more destructive of respect for the government
and the law of the land than passing laws
which cannot be enforced.[viii]
Albert Einstein
There are numerous existing consumer protection laws that will be included in the transfer to the Bureau by July 21, 2011, the Designated Transfer Date,
[ix] thereby giving it exclusive rulemaking and examination authority.
[x]
These “enumerated laws” include:
[xi]
- Alternative Mortgage Transaction Parity Act (AMTPA)[xii]
- Community Reinvestment Act (CRA)[xiii]
- Consumer Leasing Act (CLA)[xiv]
- Electronic Funds Transfer Act (except the Durbin interchange amendment) (EFTA)[xv]
- Equal Credit Opportunity Act (ECOA)[xvi]
- Fair Credit Billing Act (FCBA)[xvii]
- Fair Credit Reporting Act (except with respect to sections 615(e), 624 and 628) (FCRA)[xviii]
- Fair Debt Collection Practices Act (FDCPA)[xix]
- Federal Deposit Insurance Act, subsections 43(c) through 43(f)(12) (FDIA)[xx]
- Gramm-Leach-Bliley Act, sections 502 through 509 (GLBA)[xxi]
- Home Mortgage Disclosure Act (HMDA)[xxii]
- Home Ownership and Equity Protection Act (HOEPA)[xxiii]
- Real Estate Settlement Procedures Act (RESPA)[xxiv]
- S.A.F.E. Mortgage Licensing Act (S.A.F.E. Act)[xxv]
- Truth in Lending Act (TILA)[xxvi]
- Truth in Savings Act (TISA)[xxvii]
- Omnibus Appropriations Act– Section 626 (OAA)[xxviii]
- Interstate Land Sales Full Disclosure Act (ILSFDA)[xxix]
As I have discussed elsewhere, the Bureau would be assigned primary authority to enforce the aforementioned laws, but other federal regulators, including the Department of Housing and Urban Development (“HUD”), the banking agencies, and the Federal Trade Commission, would retain overlapping, secondary enforcement authority over certain requirements. State Attorneys General would be empowered to enforce federal laws under the Bureau (subject to any existing limitations in the laws to be transferred to the Bureau's authority).
[xxx] And state consumer financial protection laws would not be preempted, except to the extent that they are inconsistent with federal law (although such state laws could be stricter than the federal laws, in which case they would not be preempted by federal law).
[xxxi]
