Transcript Slide 1

OpportunityTexas
Federal Financial Reform:
Implications for Texas and Consumers
FDIC AEI Meeting
Austin, TX
August 4, 2010
Don Baylor, Jr. Senior Policy Analyst
What CPPP Does
Improving public policies to better the economic and social
conditions of low- and moderate-income Texans.
 Creating economic opportunity to strengthen families
and grow the middle class;
 Increasing access to quality, affordable health
insurance;
 Helping families meet basic needs;
 Enhancing child well-being and child protection;
 Ensuring effective public administration; and
 Securing fair and adequate taxation to pay for critical
public investments in Texas.
RAISE Texas
• Statewide network working to support and
expand asset-building activities in Texas, with a
focus on low- and moderate-income areas.
• Committed to building financial success of Texans
through financial education, IDAs, children's
savings accounts, community tax centers, and
other programs that lead to increased economic
security and prevent asset stripping.
What is OpportunityTexas?
Income, Savings, and Job Creation
Community Investment
Innovation
Public-Private Partnerships
Systems Integration
Joint Project of CPPP and RAISE Texas
Official Launch in Fall 2010
Dodd-Frank Wall Street Reform
& Consumer Protection Act
“To promote the financial stability of the United
States by improving accountability and
transparency in the financial system.”
“To ensure American consumers get the clear,
accurate information they need to shop for
mortgages, credit cards, and other financial
products, and protect them from hidden fees,
abusive terms, and deceptive practices.”
“[Consistent consumer
protection rules are] good for
Americans, and it’s good for us as
providers because we know the
playing field is level.”
– John Stumpf, Wells Fargo & Co.
Chief Executive Officer
Consumer Financial Protection
Bureau: The New Consumer
Federal Architecture
Director, CFPB
Office of Fair Lending and Equal
Opportunity [OFLEO]
Community Affairs
Office of Service Member Affairs
Research
Office of Financial Education [OFE]
Complaints
Office of Financial Protection for Older
Americans [OFPOA]
Private Student Loan Ombudsman
CFPB: Who Is Covered?
Others as Defined
by Rule
Other Financial
Institutions
(Rulemaking Only)
Offer Private
Student Loans
Covered Persons
Very Large
Financial
Institutions
Offer Payday
Loans
Mortgage
Originators,
Brokers, and
Servicers
CFPB: What Is Covered?
Others as Defined
Stored Value
(limited)
Certain Financial
Advising (credit
counseling and
debt management
or settlement)
Covered
Financial
Products or
Services
Remittances
Check Cashing,
Check Collection,
or Check Guaranty
Credit Reporting
Debt Collection
Real Estate
Settlement
Notable Exemptions from
CFPB Oversight
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Auto Dealers (General)
Attorneys
Accountants
Real Estate Brokers
Tax Preparers
Insurance Companies/Agents
What’s on the CFPB’s Agenda?
 Identify as unlawful unfair, deceptive, or abusive acts and
practices by covered persons, and set up requirements to
prevent these practices
 Add to the list of financial products and services covered
under certain conditions
 Determine what other non-depository persons should be
under the CFPB’s examination authority
 Prescribe how non-depository covered persons should be
registered
 Decide what information covered persons must disclose
to consumers about financial products or services
 Determine procedures for timely response to consumer
complaints against or inquiries about covered persons
Interchange or “Swipe” Fees
• Interchange Fees Have Risen
– Retailers Paid $48B in 2009
– Current Average Fee: 1.63%
• Fees should be “reasonable and
proportional”
• Merchant may decline small purchases (up
to $10)
• Exemption for “reloadable” debit cards
Mortgage Reform & AntiPredatory Lending Act
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Establishes the “Qualified Mortgage”
Requires Documentation for Ability to Repay
Resets HOEPA (high cost loan) threshold
Prohibits prepayment penalties for “nonqualified”
mortgages
• Bans “Steering” Incentives
• Prohibits Current Yield Spread Premiums
• Gives CFPB authority to prohibit mandatory
arbitration, pending study
What is a Qualified Mortgage?
 Regular periodic payments may not result in an increase of or allow
for a deferred repayment of principal
 Does not result in a balloon payment (except at discretion of FRB)
 Verifies and documents obligors’ income and financial resources
 In a fixed rate loan, bases underwriting process on full amortization of
the loan over the loan term
 Complies with debt-to-income guidelines or regulations (to be
established by the FRB, could also include alternative measures of
ability to pay)
 Mortgage origination fees generally do not exceed 3% of the loan
amount
 Has a term of 30 years or less (with some exceptions)
 In reverse mortgages or smaller loans, adheres to standards to be set
by the Federal Reserve Board
Community Re-Reinvestment
(Effects of the Mortgage Crisis)
• Neighborhood Stabilization Program ($1B)—
state and local grants to combat effects
of foreclosure
• Emergency Mortgage Relief ($1B)— bridge
loans for unemployed homeowners
• Foreclosure Legal Assistance– HUD grants for
LMI homeowner and tenants
Federal Preemption of
State Consumer Laws
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Conditions for Preemption
If state law is inconsistent with the Act
If state law has discriminatory effect on
federal banks
If state law forbids or impairs national bank
activity
If state law is already preempted by federal
statute
Consumer Education
• Office of Financial Education
– Develop programs to improve consumers’ financial
literacy and familiarity with financial products
• Study and Report on Financial Literacy Program
• Office of Housing Counseling (HUD)
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Foreclosure Rescue
Consumer Mortgage Software Platform
National Public Service Multimedia Campaign
Home Inspection Counseling
• Mandatory Counseling for High-Cost Loans
Credit Reports and Scores
• Scores are required to be collected under
HMDA, along with age and origination channel.
• Consumers are now allowed free access to
scores if their scores negatively affected them in a
financial transaction or hiring decision (credit
score disclosure).
• CFPB authorized to conduct regular examinations
of large credit bureaus to evaluate their
compliance with the law, including the Fair Credit
Reporting Act.
Enhanced Consumer Data
Collection & Reporting
► CFPB Research Unit
► Consumer Economic Behavior
► Access by Underserved Communities
► HUD/CFPB Default and Foreclosure Database
► Making Home Affordable Program Report
► M/W/SBE Credit Application Tracking
► Federal Report/Study on Credit Scores Variation
► Federal Report on Private Education Loans
► Expanded Mortgage Loan Data Requirements
► Annual Report on General-Use Prepaid Cards in Federal,
State, or Local Government-Administered Payment
Programs
FFR & Asset Building
Title XII: Increasing Access to Mainstream
Financial Institutions
• Financial Education and Counseling
– Small Dollar Loan Grant Program (<$2,500)
– Community Development Financial Institutions
(CDFIs) Loan-Loss Reserve Fund
– CDFI Technical Assistance
• “Bank On USA” Grant Program
– Enrollment in Checking, Savings & Investment
Accounts
– “Wealth building” Activities
Implications for State Policy
• Texas Attorney General
– Broader authority to enforce state law and CFPB regulations vs. federal
banks
– Bring action vs. state-chartered banks for federal violations
• Texas Department of Housing & Community Affairs
– Drive the “qualified mortgage” market
– Granted larger role in homeowner counseling
• Texas Appraiser Licensing and Certification Board
– New Registration Requirements
– Eligible for Federal Compliance Grants
• Office of Consumer Credit Commissioner
– identify and refer bad actors to CFPB
– Receive and Act upon federal referrals
• State Resolutions Can Drive Federal Rulemaking (25+1)
• States can be grantees/partners for “Bank On” activities
The Year Ahead
• CFED Assets Learning
Conference, September 22-24,
Washington, D.C.
(www.cfed.org)
• William P. Hobby Policy
Conference, September 23-24,
Austin, TX (www.cppp.org)
• RAISE Texas Policy Conference,
December 2010, Austin, TX
(www.raisetexas.org)
• OpportunityTexas Launch,
December 2010
• 82nd Legislature, January 2011
(www.cppp.org)
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