The National Association of Independent Housing Professionals Tuesday officially requested that CFPB deputy director Raj Date resign because he is “biased” against mortgage brokers and has “internally finalized” regulations that would harm the sector.
“Based on his apparent bias against brokers, I’m concerned the proposed changes to loan originator compensation, as well as other expected rule revisions, have already” been fixed by the agency, NAIHP president Marc Savitt said in a statement.
On Monday Date, a former investment banker who worked at Deutsche Bank—a major backer of subprime firms during the housing boom—blamed the mortgage bust partly on brokers, saying “…after all, if you think back to the most problematic vintages of mortgages during the bubble—for example, subprime and alt-A mortgages between 2005 and 2007—most of those problematic mortgages were originated not by supervised banks, but by mortgage brokers and finance companies who then sold those loans into capital market execution on Wall Street.”
Speaking before an American Bankers Association forum, Date added, “As a result, the most important, the most visible person in the mortgage process for many borrowers—the mortgage broker—had a financial stake that was confusingly and perversely in direct opposition to the interest of the consumer himself.” (In particular, Date blamed yield-spread premiums.)
However, according to figures compiled by National Mortgage News and the Quarterly Data Report, at the peak of the subprime boom in 2006 five of the ten largest subprime funders were depositories insured by the FDIC: Countrywide, Wells Fargo, Fremont Investment, Washington Mutual and First Franklin.
A spokeswoman for the CFPB said, "In his remarks to the ABA, Mr. Date criticized a broken system in which some mortgage loan originators win when consumers lose. In enacting Dodd-Frank, Congress outlawed the practices Mr. Date discussed for the reasons he explained in his speech. The bureau is in the early stages of developing rules to implement this new prohibition and welcomes the input of all stakeholders as it moves through the process.”
Date, the No. 2 executive at CFPB, was a managing director in the Financial Institutions Group at Deutsche Bank Securities, where he led the firm’s investment banking coverage for the largest U.S.-based banks and thrifts. He left in 2009.
The CFPB is weighing new loan officer compensation rules that in some instances would require flat fee compensation for loan officers, brokers and others involved in the origination process.
Current CFPB rules require nonbank LOs, including brokers, to meet testing and licensing requirements that bank LOs are exempt from.
