January 5, 2012

Open Letter To New CFPB Head Richard Cordray

January 5, 2012

Open Letter To New CFPB Head Richard Cordray

Yesterday, president Obama sidestepped Congress to install Richard Cordray as head of the Consumer Finance Protection Bureau (CFPB). Today Cordray issued a letter asking consumers to submit their good or bad stories about consumer financial products. He said those stories “will help inform how we work to protect consumers and create a fairer marketplace.”

His letter is below, and I’m surely not the only consumer-facing finance pro to parse that letter like it’s an FOMC statement.

My initial take: he’s got an incredibly political job. He does a nice job of personalizing his goal with a specific consumer loan-modification-gone-bad anecdote. Old political speech technique, but still: well executed.

But it’s curious that he chose loan modifications. This is an area of finance that has only risen to prominence with the housing bust. There were never any rules written on disclosures, fees, etc. for loan mods because Notes and Deeds of Trust spelled out terms clearly.

The result: negotiating a loan mod is like the wild West. No bank evaluates it the same because it’s a case-by-case decision. Clouding it more is the fact that everyone from former loan agents to former escrow officers to attorneys stepped in to capture loan mod business, and there’s no two loan mod fee models that look exactly alike.

So it’ll be interesting to see if loan mods are a pet topic. I hope not—at least to start—because the CFPB needs to keep its eye on their current initiative of revising mortgage Good Faith Estimate disclosures.

I’ve said repeatedly the three-page GFE implemented January 2010 (after receiving OMB approval under Orszag’s rule) is a joke. For example, it combines fees into groups instead of showing each line item, and disclosure rules require it to show seller-paid fees (like transfer tax) as buyer-paid.

This afternoon, I spent 90 minutes explaining it to new clients buying a home (that I’d categorize as astute consumers), and they’re still dubious about the terms I’m presenting—which are incredibly straightforward when not displayed in this form. All because I’m forced to use a form written by people who have never originated a consumer mortgage.

So Richard, please keep your eye on the ball and finish the new GFE that the CFPB has been working on since May 2011.

Naturally, the fourth draft you recently released is less clear than the first, but it’s still worlds better than the existing form that makes people in my profession look like we’re trying to hide something.

I’ll say that again: The disclosures that mortgage loan agents have been required by Federal law to use since January 2010 make us look like we’re trying to hide fees.

Please fix this, and please let me know how I can help. I put those forms in front of clients every single day, and 80% are baffled, even the PhD’s.

You say you’re listening Richard. And as a lender whose whole life is centered around doing the right thing for my clients, I really hope you are.

And for everyone else reading this, here’s Richard’s letter to you. Click the links and go tell him your stories…

Happy New Year,

As the new Director of the Consumer Financial Protection Bureau, and as someone who has been helping to build the Bureau for about a year now, I can tell you it’s an extraordinary privilege to work on behalf of American consumers.

Consumers like you. Tell your story.

In our first six months, our team at the Bureau has been answering calls and reading stories from hundreds of American consumers every week. Their stories illustrate the kinds of issues people are dealing with around the country.

These things can happen to anyone. We are not talking about some impersonal abstraction, not about somebody “else.” We are talking about each one of us. We’re talking about our mothers and fathers, our sisters and brothers, our sons and daughters. Regular people who are trying to make the right choices for themselves and their families.

We’ve heard from people like Rebecca from North Carolina. She told us she missed a mortgage payment nine months after her husband lost his job. In the two years since then, her mortgage servicer has increased her payments even though she entered a trial modification in an effort to lower her monthly payments. The servicer has charged her monthly fees for inspections and appraisals that she never asked for and she believes have never occurred, all while repeatedly threatening her with foreclosure unless she shells out more money in unexplained fees. Rebecca has frantically complied with all of these demands because she is afraid of foreclosure and so is doing whatever she can to stay in her home.

Tell us your story at

With the stakes so high, consumers need to be able to fully understand the costs and risks of borrowing on credit, and they need to be able to comparison shop for the best deal. Consumers deserve to have someone who will stand on their side, who will protect them against fraud, and who will ensure they are treated fairly. The new Consumer Bureau was created to make sure that these things are achieved for all Americans. The good news is that we have already gotten started.

Over time, we will judge the success of our efforts by considering whether consumers are treated more fairly and with more clarity and candor in the financial marketplace. We deeply believe that we must hear from Americans about their experiences.

Can you share your experience?

Think about your own family members. Like all of us, they want to be able to use consumer credit to make their lives better, not worse. That is our goal as well. The financial marketplace can be a potent arena that helps people find and seize opportunity, not condemn them to bewildering failure. By working every day to protect consumers, we will help to fashion a more resilient economy and a stronger country. Join us; work with us; help us make it so.

Thank you,
Richard Cordray
The Consumer Financial Protection Bureau