As House Bill Passes, CFPA Moves Closer to Becoming a Reality

The House of Representatives on Friday passed a massive regulatory reform bill that, among other things, creates a new consumer protection agency with authority to set mortgage lending standards for all residential originators. The House passed the "Wall Street Reform and Consumer Protection Act" (H.R. 4173) by a 223-202 vote. The accepted language creates the Consumer Financial Protection Agency, a Washington regulatory body that would set industry-wide rules for mortgage lending and take over enforcement responsibilities from the federal banking agencies. An industry-backed amendment to gut the CFPA and turn it into a consumer protection council representing 12 regulatory agencies failed by a close vote of 223-208. The American Bankers Association said it opposes several sections of the 1,200 page bill, including the CFPA. "The breadth of authority granted to the director of the proposed new consumer financial regulator is unprecedented," said ABA president Ed Yingling. "This new regulator would not be responsible for considering institutional safety and soundness along with consumer protection." (ABA believes it's essential that safety and soundness and consumer protection oversight be performed by the same regulatory body.) The Mortgage Bankers Association also has issues with CFPA. But MBA and other industry groups were glad to see a bankruptcy cramdown amendment defeated by a 241-188 vote. "We are gratified that the House saw fit to vote down the bankruptcy cramdown amendment," said MBA chairman Robert Story. Earlier this year, the House passed a bill that would allow bankruptcy judges to cram down or reduce the principal amount of a homeowner's mortgage. The Senate rejected the cramdown bill.