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Former CFPB Officials Under Congressional Fire
The chairs of the House FinancialrnServices (FSC) and the Oversight and Government Reform Committees arernfocusing on business relationships four former senior officers of thernConsumer Financial Protection Bureau (CFPB) have formed since leavingrnBureau employment earlier this year. In a letter to CFPB DirectorrnRichard Cordray FSC Chairman Jeb Hensarling (R-TX) and OversightrnChairman Darrell Issa (R-CA) questioned whether the four left CFPB inrnorder to profit from mortgage rules they helped to create.</p
The letter states that former CFPBrnemployees, including Raj Date, Gary Reeder, Chris Haspel, and MitchrnHochburg, “while serving in senior leadership positions helpedrnto write a series of rules broadly affecting mortgage lending in thernUnited States”. One such rule, mandated by the Dodd-Frank Act,rnprohibits a creditor from making a mortgage loan without regard tornthe consumer’s ability to repay the loan in order for the loan to bernconsidered a “qualified mortgage” for which the law thenrnoffers certain protections from liability.</p
“Many stakeholders andrnpolicymakers, including members of our Committees, warned that ‘ifrnthe CFPB is not careful, this rule could price millions of Americansrnout of the mortgage market at a time where it has already become morerndifficult to qualify for affordable home loans,'” the letterrncontinues. “The stricter rules would place greater liability onrnlenders that make loans that do not meet the ‘qualified mortgage’rnstandard by allowing borrowers to sue for damages in the event ofrnforeclosure.”</p
CFPB adopted its final rule onrnqualified mortgages in January 2013 and about a month later, thernletter states, Mr. Date left his Deputy Directors position at CFPBrnsaying he had no plans other than to spend time with his family. “However, on May 11, 2013, less than two months after leaving</bhis senior post at the CFPB, Mr. Date incorporated an advisory andrninvestment firm known as Fenway Summer LLC (Fenway). Fenway focusesrn'on those who do not meet the standards for qualified mortgages asrnset by the CFPB under rules (sic)' (Ed. quoting from a news story). To help in this endeavor, he hired Mr. Reeder, Mr. Haspel, Mr.rnHochburg, and other CFPB employees to staff his firm."</p
While Date had testified to FSC thatrnqualified mortgages “are structurally safer and pose lower riskrnfor borrowers,” Hensarling and Issa said, Date recently toldrnBloomberg that “‘[t]here are plenty of borrowers who arerneminently responsible people but fall outside of thernbright-line·boundaries … nd there’s a meaningful-sized business that can be quite good for borrowers and for lenders andrninvestors to be able to satisfy that need.” </p
The letter says, “This conduct raisesrnserious questions about the integrity of the CFPB’s rulemakingrnprocess and the conduct of some of its most senior former officials.rnWe are deeply concerned that this close relationship between the CFPBrnand its former officials ultimately could harm consumers.”</p
The letter continues, “Although thernCFPB is now two years old, it remains ‘something of a mystery tornmany market participants as it ramps up operations.’ This lack ofrntransparency has apparently incentivized [Raj] Date and other CFPBrnalumni to create a cottage industry unique to the Bureau’srnregulatory agenda.”</p
Issa and Hensarling havernrequested the following documentation from Cordray by August 14:</p<p1.All.documents and communications betweenrnthe four named employees and any other official at the CFPBrnreferring or relating to the drafting of the qualified mortgage rulernbetween February 17, 2011, and the present;</p<p2.All documents that provide an accounting of the CFPB's attritionrnrates on an annual basis, between July 21, 2010, and the present;</p<p3.All documents and communications betweenrnMr. Date and any CFPB employee or agent referencing or relating tornthe conception, design, or mission of Fenway Summer, between Februaryrn17, 2011, and the present; and</p<p4.All documents and communications between any partner or employeernof Fenway Summer LLC and any CFPB employee or agent between March 11,rn2013, and the present.</p
The letter is also signed byrnSubcommittee Chairman Shelley Moore Capito, (R-WV) SubcommitteernChairman Patrick McHenry, (R-NC) and Subcommittee Chairman JimrnJordan, (R-OH).
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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