MBA Chairman Bill Cosgrove’s Open Address: “Guidance in enforcement is needed … not a relentless cycle of penalties”

MBA Chairman Bill Cosgrove’s Open Address: “Guidance in enforcement is needed … not a relentless cycle of penalties”

In his opening address to the membership this morning, MBA Chairman addressed the alphabet soup of federal and state regulations from six federal agencies, 50 states, and quasi-contractual FANNIE MAE and other underwriting requirements.  His speech was a call to arms to the membership to take on the mantle of advocacy in seeking more guidance, clarity and consolidation of regulatory guidelines for the industry.

Chairman Cosgrove noted that the never-before-seen regulatory environment governing the residential financial services industry today has increased loan origination costs 100% and servicing costs nearly 250% since 2008.  The net effect is that many borrowers either cannot afford home loans or are sitting on the sidelines waiting for better opportunities.  Another unintended effect is that the government is regulating independent community banks out of business because they cannot afford the costs of compliance.  Indeed, the number of independent community banks has fallen more than 15% since 2008 despite the fact that 42% of home loans are historically originated by independent banks.

Even in the face of regulatory overburden, the industry now faces TRID’s (integrated disclosures under TILA and RESPA) compliance  deadline of August 1 with no written guidance from the CFPB.  The MBA has suggested to the CFPB the implementation of a grace period so financial institutions can work out the kinks in a wholly new form system and procedures.  To date, no grace period has been adopted by the bureau.  The MBA also suggests more supervisory guidance through memoranda and other means.

In short, the apparent lack of guidance combined with severe enforcement procedures and penalties is reducing healthy competition, affordability and availability of credit to consumers.  In Cosgrove’s words, “rule-making through enforcement is not rule-making at all.”

For more information on this opening address recap or to discuss your questions, please contact Donald A. Rea.