The government wants to know your credit score

 Credit Scoring, Regulations, Residential Mortgage  Comments Off on The government wants to know your credit score
Jan 122018

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By G. Steven Bray

If you’ve applied for a mortgage recently, you may remember the government monitoring section of the application. The government asks you to identify your sex, race, and ethnicity so it can watch for patterns of unfair lending.

However, it seems the data the government was collecting didn’t provide enough granularity. The data might show more members of a minority group were denied loans, but it provided few insights into the disparity.

The solution – collect more data. Starting in 2018, lenders are required to report more invasive information for every loan applicant, including your credit score and debt-to-income ratio. In addition, lenders must report property values.

The stated goal of this data collection is to ensure fair lending, but it is a bit disconcerting. The CFPB insists the data is anonymized so that individual borrowers cannot be identified. However, privacy advocates worry that the expanded information collection gives nefarious actors enough hints to disaggregate the data. In addition, the data will be housed on government computer systems that have a history of being hacked.

As a consumer, you have no choice whether lenders collect and report the expanded data when you apply for a loan. Your only choice is whether you choose to identify your sex, race, and ethnicity, but that doesn’t stop the lender from reporting your other private financial data.

Congress offers relief from financial regulations – Part 2

 Regulations  Comments Off on Congress offers relief from financial regulations – Part 2
Jun 232017

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By G. Steven Bray

Yesterday, we reviewed how the Financial Choice Act, recently passed by the House, would affect banking regulations. Today, we’re going to look at how it would change the Consumer Financial Protection Bureau.

The bill would have three major effects:

– It would change the name of the bureau to the Consumer Law Enforcement Agency and change its mission to enforcing existing consumer financial regulations rather than creating new ones. In this sense, it would function more like other independent federal agencies.

– It would allow Congressional oversight through the appropriations process.

– It would change the leadership from a single, unaccountable director to one who serves at the pleasure of the President.

Democrats seem most exercised about this provision as they view the current untouchable director as a way to maintain their preferred regulatory scheme across presidential administrations.

As I said yesterday, the bill’s fate in the Senate seems dim, but three additional developments offer hope to those favoring change:

– A Congressional Budget Office analysis indicates the Choice Act will reduce the deficit by $33 billion, which makes it possible Republicans could use the reconciliation process to pass reforms with only 51 Senate votes.

– Second, the courts seem poised to decide that the CFPB current structure is unconstitutional, but the final decision still may be a couple years away.

– Finally, it seems likely the CFPB’s current director will resign to run for governor of OH, which would allow President Trump to appoint a reformer to the position.

Oh, no! Trump dismantling consumer protection

 Regulations  Comments Off on Oh, no! Trump dismantling consumer protection
Feb 202017

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By G. Steven Bray

Despite the hysterical headlines that President Trump was dismantling consumer financial protections by executive order, the truth is much less exciting.

Trump has called Dodd-Frank, the recession-era law that created the current regulatory structure, a disaster and pledged major reforms. Earlier this month, he ordered his financial team to review the law and develop a plan to overhaul it. This starts a likely many-month process to modify Dodd-Frank and other financial regulations that are stifling lending and driving community banks out of business.

While Trump conceivably could rewrite or reverse some financial regulations once his appointees take charge at various federal agencies, he cannot change statutory rules, such as those enacted through Dodd-Frank, without Congressional action.

Unfortunately for those hoping for quick action, that appears unlikely. While the House already is moving legislation to rewrite the law, Senate Republicans need help from Democrats. Senate Banking Comm Chair Mike Crapo says, “The climate right now in the Senate is as toxic as I’ve ever seen it.” Crapo hopes he can get some Democratic support for changes that will promote lending by easing rules for smaller and community banks.

The eventual changes could be significant, but the pace of change will allow for serious consideration and certainty doesn’t justify the silly headlines.

Government says no worries; your financial data is safe

 Regulations, Residential Mortgage  Comments Off on Government says no worries; your financial data is safe
Nov 072015

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By G. Steven Bray

I’ve never considered myself much of a conspiracy nut, but the government’s latest data gathering plan has me concerned for my privacy. As part of the Consumer Financial Protection Bureau’s crusade to discover housing discrimination (even where it doesn’t exist), it will start collecting far more intrusive data about every mortgage, including your income and credit score.

Do you really trust the government with your information? This is the same government that had data breaches at the Office of Personnel Management, the State Dept, the Defense Dept, the IRS, the Federal Reserve – the list goes on. Why in the world would I be comfortable with the CFPB holding this data?

What’s more, do you really trust the government to behave? Think the IRS might want to look the income you reported to your lender?

This seems to be a done deal at this point unless Congress steps in. Fortunately, the data collection doesn’t start until 2018, so we have a chance. However, if the rule doesn’t change, the only way to avoid the government collecting your sensitive information is to pay cash for your home.

If you really hate your bank…

 Residential Mortgage  Comments Off on If you really hate your bank…
Apr 102015

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By G. Steven Bray

The Consumer Financial Protection Bureau (CFPB) has launched a new Web site to solicit complaints about creditors. Handling consumer complaints isn’t new for the CFPB. What is new is you can gripe anonymously, and the CFPB won’t attempt to verify your story regardless of how outlandish it may be.

Think your lender screwed you on that late payment? Flame them with a post on the CFPB site for the whole world to see.

The CFPB readily admits that most consumer complaints it receives are baseless, and only 7% last year resulted in monetary relief, but the CFPB thinks it’s important to support victimhood.

The CFPB says it launched the site at the urging of consumer advocacy groups, and those groups are most likely to benefit from it. Recent history suggests the groups use consumer complaints to shake down banks for operating funds. It’s cheaper to toss half a million dollars at ACORN than to battle them in court, and it’s easier on the reputation. Consumers will view the stories as credible because they appear on a government Web site, and the press has a poor record of correcting the story when complaints turn out to be bogus.

It’s a shame the CFPB continues to make creditors the pariahs of the economy. It just makes it that much harder for an economic recovery to take hold.