Last week, the Consumer Financial Protection Bureau (CFPB or Bureau) submitted several regulatory proposals to the Office of Management and Budget (OMB) for review. Among the rules under consideration are those related to loan originator (LO) compensation and discretionary mortgage servicing, governed by the Truth in Lending Act (Regulation Z) and the Real Estate Settlement Procedures Act (Regulation X). Additionally, the CFPB is reviewing its “larger participant” rules, which define the scope of its supervisory authority over major players in the debt collection and consumer credit reporting sectors. These rules, currently in “prerule” status, are under scrutiny by the OMB.
The first three rules under review are mortgage regulations that emerged from the Great Recession. These rules were designed to protect consumers by ensuring fair practices in loan origination and servicing, addressing issues such as compensation, error correction, and loss mitigation. The LO compensation requirements aimed to reduce incentives for loan originators to steer consumers into loans with unfavorable terms. The discretionary servicing rules under Regulation X focus on servicers’ obligations to correct errors, provide information, and offer protections related to force-placed insurance. These rules also streamline existing provisions related to mortgage servicing transfers and escrow account management.
The CFPB is also reviewing its “larger participant” rules, which determine the scope of the agency’s supervisory powers over major players in the debt collection and consumer credit reporting markets. These rules, established under the Dodd-Frank Act, allow the CFPB to oversee the largest entities in these sectors.
The CFPB’s decision to subject these rules to OMB review marks a significant shift in regulatory oversight. This change aligns with a broader trend under the current administration to bring independent regulators under closer White House supervision.
Over the course of the next several weeks, we will offer further insight into the implications of the repealing these rules. Stay tuned.
