Conference Reaches Deal on Financial Regulatory Reform
The House-Senate Conference to reconcile financial regulatory reform reached a final agreement on the legislation on Friday. The "Dodd-Frank Wall Street Reform and Consumer Protection Act" calls for the creation of the Consumer Financial Protection Bureau, an independent agency to be housed at the Federal Reserve, with a broad mandate to regulate consumer financial services of virtually all types.
The Consumer Financial Protection Bureau will have an independent director appointed by the President and confirmed by the Senate, with an independent budget and independent rule writing, examination, and enforcement authority. The CFPB consolidates consumer protection responsibilities of the OCC, OTS, FDIC, Federal Reserve, NCUA, HUD, and the FTC. Among other things, the legislation also creates a new Office of Financial Literacy to disseminate information to consumers and a new consumer hotline for consumer questions.
The legislation also provides for significant changes to regulations regarding mortgage financing, including
- Requiring lenders to ensure a borrower's ability to repay;
- Prohibiting yield spread premiums and pre-payment penalties;
- Establishing new penalties for lender violations;
- Expanding regulation of "high-cost loans;"
- Requiring additional consumer disclosures for mortgages; and
- Establishing an Office of Housing Counseling within HUD to boost homeownership and rental housing counseling.
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