CFPB goes rogue under Rohit Chopra

In the final weeks of 2021, the mortgage industry received an unwelcome holiday gift from Consumer Financial Protection Board Director Rohit Chopra. The CFPB is preparing to announce multiple enforcement actions against several mortgage lenders for “deceptive practices” in dealing with COVID forbearance loans.

Several lenders tell NMN that in the past two weeks they were suddenly confronted by new accusations of wrongdoing by CFPB personnel, in many cases without any basis in fact. The CFPB seems to have been turned loose by Chopra in a redux of the bad old days under former director Richard Cordray, when the agency inflicted punishment on the mortgage industry often without any basis in fact.

The “deceptive practices” alleged by the CFPB’s inquisitors include asking consumers why they were seeking forbearance, asking consumers for financial information and having too many clicks on a website for consumers to navigate. None of these accusation by the CFPB have any substance or merit, but instead illustrate the poisonous and increasingly contentious political environment in Washington created under President Joe Biden.

“The Bureau noted that it is prioritizing mortgage servicing supervision attributed to the increase in borrowers needing loss mitigation assistance due to the Covid-19 pandemic,” the CFPB stated in its fall 2021 Supervisory Highlights released on December 8, 2021. “Examiners found violations of Regulations Z and X, as well as unfair and deceptive acts and practices.”

“Deceptive acts or practices found by examiners related to mortgage servicers included incorrectly disclosed transaction and payment information in a borrower’s online mortgage loan account,” the CFPB continued. “Mortgage servicers also allegedly failed to evaluate complete loss mitigation applications within 30 days, incorrectly handled partial payments, and failed to automatically terminate PMI in a timely manner.”

None of these alleged “deceptive practices” actually resulted in consumer harm, but no matter. The CFPB storm troopers do not know or care, they merely want political scalps. Rohit Chopra seeks maximum political attention for himself and his agency, even if it means ignoring the law and treating members of the mortgage industry with a striking degree of unfairness and irrationality bordering on the criminal.

Most recently, Chopra and Federal Deposit Insurance Corp. Vice Chairman Martin Gruenberg, went completely off the reservation and outside of federal law and procedure by pretending that the FDIC board had conducted a rule making with regards to bank mergers. In fact, no board meeting actually occurred, but in the fantasy world inhabited by Rohit Chopra, it matters not.

In an erroneous blog post on the CFPB website, Chopra pretends that the FDIC board has issued a request for comment on bank mergers. “Across our economy, major sectors have become more consolidated,” Chopra writes regarding bank mergers. “But consolidation can actually make it more difficult for smaller players to break in, denying the public of the benefits of competition. It can also make our economy less resilient and more vulnerable to shocks.”

Gruenberg and Chopra indicated falsely that the Board members taking part in this action have approved a Request for Information and Comment on Rules, Regulations, Guidance, and Statements of Policy Regarding Bank Merger Transactions, which would seek public input on the FDIC’s approach to considering prudential factors in acting on a bank merger application, specifically related to “whether bright line minimum standards for prudential factors should be established, and if so, what minimum standards for which prudential factors.”

But in fact, no such action has occurred. In a statement later on the same day, FDIC Chairman Jelena McWilliams repudiated the CFPB’s actions as well as the renegade behavior of Gruenberg, a far-left political crank who long worked as a staffer to Senator William Proxmire (D-Wis.). The irrational and illegal actions by Chopra and Gruenberg raise legitimate questions as to whether any statements or actions by the CFPB should be taken seriously by private financial institutions.

After the release of the CFPB’s joint announcement, the FDIC released a statement disputing that any action had been approved by the FDIC board, stressing that it “has longstanding internal policies and procedures for circulating and conducting votes of its Board of Directors, and for issuing documents for publication in the Federal Register.”

The FDIC added that “[i]n this case, there was no valid vote by the Board, and no such request for information and comment has been approved by the agency for publication in the Federal Register,” the FDIC commented that “[n]otwithstanding the actions taken today, the FDIC expects this time-honored tradition of collegiality and comity to continue.”

That same day, Senator Pat Toomey (R-Pa.) issued a statement calling upon President Biden to disavow “this odious destruction of political norms” committed by Chopra and Gruenberg. Senator Toomey accurately characterized Chopra’s actions as “an unlawful attempt to circumvent FDIC Chairman Jelena McWilliams.”

“This failed, publicity-seeking attempted coup is exactly the kind of lawless overreach that Senate Republicans warned about with Rohit Chopra,” Toomey stated. “His reckless behavior today undermines the independence and integrity of the FDIC. It represents a radical politicization of a long-respected financial regulator. There’s no legitimacy to this supposed ‘vote’ or Mr. Chopra’s tweet.

“That Marty Gruenberg would participate in this farce is disappointing but not surprising given his blemished record of implementing illegal Operation Choke Point and his mismanagement of the FDIC during his chairmanship,” Toomey continued.

“In its history, the bipartisan FDIC board has generally worked in cooperative fashion no matter which party controlled the White House,” says Toomey. “This unprecedented, illegitimate attempt to depose a bona fide and Senate-confirmed chairman would severely weaken the ability of independent regulators to operate free from political interference. The administration should disavow this odious destruction of democratic norms.”

The actions of Rohit Chopra should serve as a wake-up call for the entire mortgage industry. The CFPB under Rohit Chopra is returning to the bad old days of the CFPB under Richard Cordray, when the agency attempted to extort billions in fines from mortgage lenders without any evidence of consumer harm. More, Chopra is reckless and appears to be willing to violate the law in order to further his political career.

The good news, of sorts, is that Rohit Chopra’s actions may create an opening for mortgage lenders to challenge the CFPB’s actions more broadly in court. By ignoring legal processes and incurring the ire of members of the Senate, the CFPB may now be vulnerable to legal attack with respect to its actions. Just remember that Ocwen Financial successfully fought the CFPB and eventually won in court. Members of the mortgage lending and servicing industry should take the example of Ocwen to heart and prepare for a long war of attrition against Rohit Chopra and the CFPB.