CHLA president addresses various consumer protection measures

Having just enough time to review the broad strokes of the CFPB’s announcement immediately before taking the stage, Stork said that he is supportive of certain recent efforts by the bureau, including caps to overdraft fees on credit card purchases.

“As a consumer, I applaud those kinds of measures,” he said. “I haven’t read all of the CFPB guidance, but here’s what I do know: The CFPB has the authority to govern and to regulate some of those servicing activities because those borrowers are serviced on loans that were either purchased by Fannie Mae or Freddie Mac, or [placed] into a Ginnie Mae pool.”

The servicing rules are such that if a loan goes through one of these agencies, certain requirements must be followed, especially if that loan is subject to a repurchase request, Stork explained.

“Last year, the big topic was repurchase initiatives,” he said. “One key point is that when a loan is repurchased, it is removed from a pool, which means it no longer has statutory protections provided through FHFA and Ginnie Mae coverage due to servicing requirements. CFPB also has a threshold under which it doesn’t have jurisdiction over servicing.”

Consumers can lose protections as a result of this, he explained.

“So, all loans repurchased and placed into a ‘scratch and dent’ pool — essentially loans sitting on someone’s private balance sheet — those consumers don’t have any of those protections,” he said. “Whether you agree with the announcement or not, this is clear evidence that repurchases are generally bad for consumers.”

Stork mentioned the Freddie Mac pilot program for repurchases in which lenders “essentially insure themselves against a repurchase,” saying that analysis of the math asserts that “the lender’s goal with that pilot program is to protect themselves from repurchase risk.

Essentially, all risks can be calculated, quantified and translated into dollars. This pilot helps mitigate the risk of repurchase, he said.

For smaller lenders that pose less risk statistically, there’s no major repurchase obligation, meaning onerous conditions are not imposed on them.

“That’s why we’re super excited about this pilot,” he said.

Touching on the topic of credit reporting, Stork said that agencies and regulatory bodies, in addition to the three major credit bureaus, are interested in credit report structures.

After a notable increase to FICO credit score pricing, it became clear that a lot of industry participants don’t truly understand what the pricing involves. The scores themselves, data from the reporting bureaus, fees for reissuance, updates and combination with a scoring algorithm all play into the pricing structure, Stork said.

“I think there’s a very huge difference in the value of data that is known data that we’re buying and then calculating the formula on, versus a custom-built analysis of the value of a property, which includes actually physically visiting the property,” he said.

“I struggle with the idea that the data which we can push a button on our computers and grab — I know it’s more complicated than that — but sometimes it’s not the same value to a consumer as making sure that the house they’re buying is really what it’s supposed to be for.”

Other topics Stork touched on with HousingWire Managing Editor James Kleimann during the session included increased fee transparency for the consumer. If the “burying” of certain fees inside of a loan becomes less transparent for borrowers, it then is more difficult for a consumer to navigate — or negotiate through — those numbers.