The rule finalized yesterday marks a crucial step in establishing a framework for mortgage regulation, said Ron Peltier, head of the real-estate brokerage business at Warren Buffett’s Berkshire Hathaway Inc.
‘Clear Pathways’
“You’ve got some clear pathways to be able to do business, which I think has been lacking,” Peltier said in a phone interview. Banks “loaded with capital” didn’t want to lend because rules weren’t defined, he said in a telephone interview.
Richard Cordray, the CFPB’s director, said it will complete new simplified mortgage documents in the third or fourth quarter, after it finishes quantitative testing on forms it has developed.
“I think that will be a game changer in the market because consumers will be able to see in a single document the main key points they need to know without all of the fine print that has often obscured and confused consumers,” Cordray said in a Bloomberg Television interview yesterday.
Dodd-Frank Mandate
Dodd-Frank required the bureau to propose by July 21, 2012, a simplified mortgage shopping sheet designed to make comparisons easier. The 1,099-page proposal subsequently drew strong criticism from lawmakers and smaller banks.
David Moskowitz, deputy general counsel at Wells Fargo & Co., the biggest U.S. home lender, said that the consumer bureau’s new rule is “Basic Underwriting 101” by his company’s standards. Even so, he cautioned that a new rule on risk retention would also affect the re-emerging mortgage market.
Dodd-Frank required most lenders and bond issuers to keep “skin in the game” -- that is, an ownership stake -- in loans they pool and sell. Under the law, residential mortgage lenders must bear some of the loss if a loan they’ve sold goes bad, unless their mortgages carry very low risk. The rule is designed to curb the practice, widespread before the financial crisis, of making and securitizing pooled mortgages without regard to the quality of the underlying loans.
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