Former CFPB Officials Under Congressional Fire

The chairs of the House Financial
Services (FSC) and the Oversight and Government Reform Committees are
focusing on business relationships four former senior officers of the
Consumer Financial Protection Bureau (CFPB) have formed since leaving
Bureau employment earlier this year. In a letter to CFPB Director
Richard Cordray FSC Chairman Jeb Hensarling (R-TX) and Oversight
Chairman Darrell Issa (R-CA) questioned whether the four left CFPB in
order to profit from mortgage rules they helped to create
.

The letter states that former CFPB
employees, including Raj Date, Gary Reeder, Chris Haspel, and Mitch
Hochburg, “while serving in senior leadership positions helped
to write a series of rules broadly affecting mortgage lending in the
United States”. One such rule, mandated by the Dodd-Frank Act,
prohibits a creditor from making a mortgage loan without regard to
the consumer’s ability to repay the loan in order for the loan to be
considered a “qualified mortgage” for which the law then
offers certain protections from liability.

“Many stakeholders and
policymakers, including members of our Committees, warned that ‘if
the CFPB is not careful, this rule could price millions of Americans
out of the mortgage market at a time where it has already become more
difficult to qualify for affordable home loans,'” the letter
continues. “The stricter rules would place greater liability on
lenders that make loans that do not meet the ‘qualified mortgage’
standard by allowing borrowers to sue for damages in the event of
foreclosure.”

CFPB adopted its final rule on
qualified mortgages in January 2013 and about a month later, the
letter states, Mr. Date left his Deputy Directors position at CFPB
saying he had no plans other than to spend time with his family.
“However, on May 11, 2013, less than two months after leaving
his senior post at the CFPB, Mr. Date incorporated an advisory and
investment firm known as Fenway Summer LLC (Fenway). Fenway focuses
‘on those who do not meet the standards for qualified mortgages as
set by the CFPB under rules (sic)’ (Ed. quoting from a news story).
To help in this endeavor, he hired Mr. Reeder, Mr. Haspel, Mr.
Hochburg, and other CFPB employees to staff his firm.”

While Date had testified to FSC that
qualified mortgages “are structurally safer and pose lower risk
for borrowers,” Hensarling and Issa said, Date recently told
Bloomberg that “‘[t]here are plenty of borrowers who are
eminently responsible people but fall outside of the
bright-line·boundaries … nd there’s a meaningful-sized
business that can be quite good for borrowers and for lenders and
investors to be able to satisfy that need.”

The letter says, “This conduct raises
serious questions about the integrity of the CFPB’s rulemaking
process
and the conduct of some of its most senior former officials.
We are deeply concerned that this close relationship between the CFPB
and its former officials ultimately could harm consumers.”

The letter continues, “Although the
CFPB is now two years old, it remains ‘something of a mystery to
many market participants as it ramps up operations.’ This lack of
transparency has apparently incentivized [Raj] Date and other CFPB
alumni to create a cottage industry unique to the Bureau’s
regulatory agenda.”

Issa and Hensarling have
requested the following documentation from Cordray by August 14:

1. All.documents and communications between
the four named employees and any other official at the CFPB
referring or relating to the drafting of the qualified mortgage rule
between February 17, 2011, and the present;

2. All documents that provide an accounting of the CFPB’s attrition
rates on an annual basis, between July 21, 2010, and the present;

3. All documents and communications between
Mr. Date and any CFPB employee or agent referencing or relating to
the conception, design, or mission of Fenway Summer, between February
17, 2011, and the present; and

4. All documents and communications between any partner or employee
of Fenway Summer LLC and any CFPB employee or agent between March 11,
2013, and the present.

The letter is also signed by
Subcommittee Chairman Shelley Moore Capito, (R-WV) Subcommittee
Chairman Patrick McHenry, (R-NC) and Subcommittee Chairman Jim
Jordan, (R-OH).

Article source: http://www.mortgagenewsdaily.com/08012013_cfpb_house_investigations.asp

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