Is Senator Shelby Trying to Sabotage Mortgage Disclosures? Does He Want Another Great Recession?

by Jeff Sovern

Senator Shelby, chair of the Senate Banking Committee, Housing and Urban Affairs Committee, has released a discussion draft of “The Financial Regulatory Improvement Act of 2015.” The draft provides in Section 117, that the CFPB's new mortgage disclosures (sometimes called the "TRID Rule"), promulgated way back in November of 2013 and scheduled to take effect this August, could be ignored by lenders providing the old mortgage disclosures (you know, the ones that consumers couldn't understand) until thirty days after the CFPB Director certifies that the new disclosures "are accurate and in compliance with all State laws."  Some in the industry have complained that 19 months wasn't enough time to comply with the new rules for forms.  The CFPB Monitor Blog explains "Potentially the concept is intended to address a concern raised by the industry that many state laws in some fashion incorporate the existing disclosures under TILA and RESPA, and have not been updated to reflect the Loan Estimate and Closing Disclosure under the TRID rule." So under this bill, if a single state wants to keep the new rules from taking effect in the entire country, all it would have to do  is refuse to amend its laws to comply with the new rule.  Which means that lobbyists just have to block action in one state to shoot down a rule for the entire country.  Oh, and in case anyone forgot, the mortgage disclosures that Senator Shelby would preserve are barely changed from the ones that led to the subprime crisis that led to the Great Recession.  After all, waiting for the states to fix their laws is more important than preventing another Great Recession.

Comments

[Mike Gilmore]

What happens if it comes out that the good Senator's voting constituents don't want that? Beyond that, there is a glaring good for goose good for gander problem. At present, the statute "unprempts" the reg, and the statute itself. If the effort is to remain free of the odor of skewed protection of banks over voters, it needs to extend "unpreemption" to all the financial regulators, so that the next time the OCC tries to squash state efforts to stop jicky financial practices that led to Dodd Frank, it can't. Or does Dodd Frank already do that, and that's what the good Senator's legislation is really shooting at?