Legal challenges to the authority of the federal consumer financial protection agency could challenge the stability of the nation’s housing market, the agency’s head said Monday, since its rules are intertwined so closely to the market.
In remarks to the Mortgage Collaborative National Conference, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra declaimed that questions about standing bureau rules, and the ability of the housing finance system system to adapt to immediate and future challenges, “would raise significant concerns for the stability of the housing market and the financial system more broadly.”
Chopra noted that his agency’s rules are facing several court challenges contesting their validity. He pointed to an action brought by the payday loan industry. That lawsuit – expected to come before the Supreme Court this fall – argues that the agency’s funding through the Federal Reserve is unconstitutional “because Congress provided the CFPB its funding through a law other than annual appropriations bills.” He noted that both CFPB and the government’s advocate before the high court, the Solicitor General of the United States, disagree.
“The case involving the CFPB has significant implications for the entire housing finance and financial regulatory system,” he said. “The CFPB is just one part of that structure, and we are not the only agency funded this way. Any doubt about the legitimacy of the CFPB could be destabilizing.”
He noted that a trade group, the Mortgage Bankers Association (MBA), filed a brief with the Supreme Court warning that calling into question CFPB rules could have “potentially catastrophic consequences on the mortgage and real-estate markets.”
Their brief, he said, also notes that “virtually all financial transactions for residential real estate in the United States depend upon compliance with the CFPB’s rules, and consumers rely on the rights and protections provided by those rules.” And that “lenders, servicers, and consumers have operated by the CFPB’s guideposts for more than ten years, and without those rules substantial uncertainty would arise as to how to undertake mortgage transactions in accordance with federal law.”
Chopra asserted that reverting to a system that existed before the financial crisis 15 years ago without the agency’s regulations “would create uncertainty for the mortgage industry and the economy.”
“And even putting aside the questions about existing rules, moving to a world where the future of housing finance oversight is uncertain and unknown, including the number of years we would be living under such mystery, should raise serious shared trepidations among market participants, financial markets, and consumers alike,” he said.
“Questions about those rules and the ability of the system to adapt to immediate and future challenges would raise significant concerns for the stability of the housing market and the financial system more broadly,” he concluded.