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).