Consumer Financial Protection Bureau (CFPB) Director Richard Cordray defended his agency Wednesday against critics who argue that its proposed new mortgage disclosure rule is too long and cumbersome.
The bureau unveiled the disclosure rule in July. The proposal combined with additional guidance and another proposal to limit consumer fees on certain high-cost mortgages totaled about 1,400 pages for the mortgage industry to digest.
The disclosure proposal is intended to simplify the disclosure process by combining overlapping requirements in the Truth in Lending Act and Real Estate Settlement Procedures Act. But in the face of criticism that the rule is too complex, Cordray told members of the House Small Business Committee that small mortgage providers had indicated they wanted the disclosure rules to be detailed.
"They have asked for more detail, more specificity, which ultimately means more pages, in order that they won't have lots of questions afterwards," Cordray said. "Why all these pages? Every one of those pages is trying to help solve problems that people have told us about."
"And by the way, if we issued a short rule, a simple rule, but left things vague, what happens is everything still has to be figured out," he added. "It involves going into court to get a court to tell you what it actually means. That's expensive for businesses. It obviously takes time. There's uncertainty during all that time."
Yet despite some skepticism from Republicans on the House committee, the questioning at the hearing — which was intended to examine the impact of the proposed mortgage disclosure rules on small firms such as community banks, mortgage brokers and settlement agents — was generally cordial.
Cordray was asked about the bureau's process for soliciting input from small financial institutions prior to the issuance of rules. The CFPB is required under the Dodd-Frank Act to convene panel meetings with small businesses about regulations that will impact them. Some small firms have complained that the process was rushed, with firms being approached only a couple of weeks before a panel convenes about participating.
Cordray acknowledged the problem, saying that the CFPB has had to act quickly to issue rules to meet certain deadlines established by Congress in Dodd-Frank. He said the situation should improve with time.
"They did complain to us, or they did comment, that it was a very quick timeframe," Cordray said. "In the future it'll be nice to have more time."
Still, Rep. Sam Graves, R-Mo., who chairs the House Small Business Committee, expressed doubts about whether the CFPB had sufficiently assessed the economic impact of the mortgage-disclosure rule on small businesses.
But Cordray pushed back, arguing that the streamlined mortgage disclosure forms will also yield long-term savings for many small institutions. He also went out of his way, as he has before, to speak favorably of the small business review panels, which create an additional hurdle for the agency as it writes regulations. So far the agency has convened three such panels.
"I can say that the feedback we received in those panels has helped us to think significantly about the basic premises of proposals under consideration and about alternatives and accommodations for small businesses," he said in written testimony.
When the agency was working on the proposed mortgage-disclosure rules, Cordray said, officials responded to every recommendation made by the small business review panel, as well as every major concern that participants had raised.
"In short, this is not a 'check the box' kind of exercise, but rather a vitally important source of information," Cordray said in the written testimony.