If regulators want to expand the amount of consumers who are able to make the most of mortgage refinances, then concentrating on expanding consumer education and providing banks more flexibility in their offerings would be a better approach than pushing new products such as \”auto-refi\” loans, the American Bankers Association and Consumer Bankers Association said today in a joint letter to the Consumer Financial Protection Bureau.
CFPB in September issued a request information on methods to facilitate mortgage refinances for consumers who would benefit from refinancing, as well as ways to reduce risks for consumers who experience disruptions within their economic situations. One suggestion by the agency was for creditors to offer one-way ARMs or loans that automatically trigger an offer to refinance. ABA and CBA said have their downsides. These products \”will introduce investor risks along with other difficulties that will ultimately result in higher prices and wouldn't improve use of credit for borrowers,\” the associations said. \”Given this reality, there is certainly no secondary marketplace for these kinds of loans, and designing them will be highly complex and challenging.\”
The associations instead suggested the bureau explore methods to expand the function of consumer education. They also suggested providing banks with greater flexibility to provide streamlined modification programs and conduct consumer outreach and education. Finally, CFPB should coordinate actions along with other regulators to ensure consistency with existing laws and regulations, also it should think about the expense of these regulations. \”The cost to originate a mortgage loan for mid-sized banks has nearly doubled from approximately $4,800 in 2008 to approximately $9,140 in 2022- Extremely high fixed costs ultimately get passed to the consumer, which disproportionally impacts individuals in the lower end of the income distribution,\” the associations said.
ABA and CBA also offered multiple recommendations to modify the mortgage servicing rules in order to promote consumer protection and improve the efficiency and effectiveness of mortgage servicing, that will benefit both borrowers and banking institutions.
