A bill that would create a Consumer Financial Protection Agency (CFPA) has emerged from a key committee vote without an amendment that would have delayed implementation of new loan mortgage disclosure forms and closing procedures scheduled to go into effect Jan. 1 under the Real Estate Settlement Procedures Act (RESPA).

In the process of "marking up" and passing HR 3126 in a 39-29 vote, the House Financial Services Committee did sign off on another amendment that would remove much of the CFPA’s oversight authority over the title insurance industry and mortgage insurers. The bill also included previous draft language limiting the CFPA’s authority over real estate brokers and agents.

The amendment to delay RESPA implementation, introduced by Reps. Judy Biggert, R-Ill., and Ruben Hinojosa, D-Texas, was withdrawn without a vote.

The amendment would have required the Secretary of Housing and Urban Development (HUD) to delay implementation of measures intended to promote comparison shopping for at least six months, until HUD has responded to "all questions" put forward by the industry about implementation of the new rule.

Industry groups wrote HUD last week warning of the potential for "widespread consumer confusion, crippling market dysfunction, and a strong possibility of an imminent litigation morass," if the RESPA rule changes are implemented as planned on Jan. 1. The groups asked for an extension of a transition period now in effect during which compliance with the new RESPA rules is optional.

Federal Housing Commissioner David Stevens rejected the request, saying the industry will have had 14 months to prepare for the rule changes by the time they become mandatory (see story).

The American Land Title Association welcomed another amendment to HR 3126 excluding title insurance from the CFPA definition of "financial activities." If CFPA is created, the amendment would ensure that title insurance industry will not be subject to new regulations aimed at banks and nonbank financial institutions, ALTA said.

Title insurers would continue to be subject to existing consumer laws, primarily RESPA, and the authority to administer RESPA would be transferred from HUD to the CFPA, ALTA said.

"Without this amendment, the CFPA would have created a whole new regulatory ball game," said Kurt Pfotenhauer, ALTA’s chief executive officer, in a press release when the amendment was introduced. "We have been able to ensure (that) what a CFPA may do tomorrow would be no different than what HUD could do today."

The U.S. Chamber of Commerce has claimed that, as originally proposed by the Obama administration, CFPA would have authority over many businesses that have little connection to the financial industry — even butchers and bakers who extend credit to customers. …CONTINUED

A draft bill proposed last month by Rep. Barney Frank, D-Mass, attempted to address such concerns, making it clear that the CFPA would not have authority over real estate agents and brokers, or other businesses that bill customers after services are provided, such as doctors and lawyers.

Frank’s compromise bill also omitted a proposal to give the CFPA the power to require that lenders offer "plain vanilla" mortgages — a concession to the lending industry that was included in the version of the bill passed by the committee.

With a full House vote on the bill expected within the next month, debate could now shift to the issue of whether Congress, if it creates a CFPA, will preempt states from passing their own, stricter consumer protection laws.

States have traditionally taken the lead in passing consumer protection laws, and have more experience in enforcing them than federal regulators, Michael Calhoun, president of the Center for Responsible Lending, told lawmakers at a hearing last month (see story).

Calhoun said his group supports the creation of a single federal consumer protection agency, but would not get behind any bill that calls for federal preemption of state and local laws.

Critics, including bankers and mortgage lenders, say that without federal preemption of state and local laws, the need to comply with many differing sets of regulations raises costs and reduces the availability of loans.

The bill approved by the committee today rejects federal preemption, and "would continue today’s patchwork of state and local laws that present implementation challenges for lenders who operate in multiple states and lead to increased costs for consumers," the Mortgage Bankers Association said in a statement.

The MBA said a better alternative would be to create a new national regulator for mortgage banks, charged with overseeing consumer protection and safety and soundness issues.

The American Bankers Association welcomed new provisions that "begin to consider the importance of uniform national law standards" for national banks and savings associations.

But the ABA remains opposed to the bill because it still has "major concerns" about restrictions on preemption standards, and to "the very broad, ill-defined authority that is granted to this new agency that could be used to justify essentially any regulatory action."


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