The creation of the Consumer Protection Bureau in the backwash of the 2008 financial implosion made congressional Republicans apoplectic. They were so intent on gutting its power that 44 GOP senators refused to confirm any director unless the bureau was first “restructured” into oblivion — a strategy that failed. So what is that feared hotbed of anti-market consumer radicalism up to in its rookie year?
Well, this week it proposed rules to make home mortgages clearer and fairer, a part of its “Know Before You Owe” campaign.
It wants to require that lenders give would-be homebuyers a clear statement of all the likely fees and payments associated with a particular mortgage, including how much interest a borrower would pay, how that could change over time and just how pricey monthly payments could eventually become. And they’d have to spell out closing costs three days before a closing.
With particularly risky types of mortgages, lenders would also have to explain those risks. They’d have to tell consumers about the downside of negative amortization loans — for instance, that the balance owed could actually increase over time if a homeowner were to fall behind on the interest-only payments. And they’d have to explain why consumers might want to avoid loans with prepayment penalties.
The public has until Nov. 6 to comment. After that the rules could be modified and/or implemented.
Requiring transparency and honesty in lending may be shocking to some after the anything-goes era that ended in an epidemic of foreclosures. But unless you make your money pushing deceptive loans, you have to wonder why so many fought so hard to kill a bureau whose mission is looking out for ordinary consumers.
Pictured above: Richard Cordray, director of the U.S. Consumer Financial Protection Bureau. (Sept. 6, 2011)