CFPB director open to changing mortgage rules to fix refi process
The mortgage industry has complained loudly and often that government regulation and investor demands are contributing to rising costs passed on to consumers. And Rohit Chopra, the tough director of the Consumer Financial Protection Bureauwho is often the target of such complaints, apparently agrees. At least when it comes to layoffs with refinancings.
“We really think closing costs could be a significant barrier to refinancing,” Chopra said at an AI and technology conference co-hosted by ICE mortgage technology and the National Housing Conference Monday on the New York Stock Exchange. “They can amount to a few percentage points of the total mortgage amount. This means it makes no sense for borrowers to refinance unless the interest rate offered is substantially lower than their current interest rate.”
In his keynote address, Chopra pointed to closing costs that borrowers can’t afford to buy as culprits: credit reports, FICO scores, employment verification and the lender’s title policy. But he also noted that certain layoffs are under the microscope.
“We are exploring whether we need to make certain changes to existing mortgage regulations to streamline the process and reduce closing costs,” he said. “When an existing or competing lender seeks to refinance a mortgage with a much lower interest rate or a substantially similar quote, it may not be worthwhile for the lender to repeat many of the steps taken during the purchasing process.”
He continued: “We are primarily interested in the costs and time required to refinance a mortgage solely related to complying with federal mortgage law, rather than steps that investors may require for other reasons. We’re also looking at identifying ways to boost competition in certain closing cost categories, which can also help drive more activity. Third, we aim for rules to accelerate the shift to open banking, with mortgages in mind.”
The CFPB will closely monitor the implementation of new mortgage technology, including applications marketed using artificial intelligence, he said. There are a number of new applications of data, including generative AI at so many stages of the mortgage process, and many of these could represent leaps that lenders and consumers can benefit from. But poor implementation could worsen existing disparities and create new ones, Chopra said.
Chopra noted that the CFPB has hired many technologists in recent years to identify areas ripe for innovation, as well as to prosecute violations of the law.
