Consumer groups warn CFPB rollback of mortgage rules could expose borrowers

A coalition of consumer and housing advocacy organizations is urging the Consumer Financial Protection Bureau (CFPB) to preserve key mortgage borrower protections, warning that proposed changes to federal lending rules could leave consumers vulnerable to predatory practices and unaffordable loans.

The National Consumer Law Center, National Housing Law Project, National Fair Housing Alliance, Americans for Financial Reform Education Fund and Consumer Federation of America submitted comments opposing changes affecting the Truth in Lending Act and Real Estate Settlement Procedures Act, which together underpin the TILA-RESPA Integrated Disclosure rules.

The groups said the existing framework was developed after years of evidence that consumers were being harmed by the complexity of mortgage transactions and urged the CFPB to focus instead on enforcing the current rules.

“Instead of weakening regulations, we urge the CFPB to enforce the existing TRID regulations,” said Steve Sharpe, senior attorney at the National Consumer Law Center. “Any changes must serve the ultimate goal of helping borrowers access safe and affordable credit.”

A central concern is the potential impact on the rules governing borrowers’ right to rescind certain mortgage transactions.

Under the current framework, borrowers have a three-day window to cancel a mortgage without penalty, giving them additional time to review final loan terms and reconsider a transaction if they were pressured into closing.

“Mortgage transactions are too complex to digest at the closing table, at the last minute,” said Andrew Pizor, senior attorney at the National Consumer Law Center. “The pre-consummation disclosures and the right of rescission complement each other. Consumers deserve to see the final loan terms before closing, and they need a chance to cancel if they have been pressured into signing. A family’s home is too important to take away these protections.”

The organizations also highlighted reverse mortgages, which they said require particular attention because borrowers must evaluate products with different loan terms and payment structures.

The groups called for improved reverse mortgage disclosures based on consumer testing and public feedback, as well as mandatory pre-loan counseling. They also recommended responsive electronic disclosures designed for different devices and streamlined disclosure options in certain circumstances.

“Disclosure is not enough,” Pizor said. “Given the complexity of reverse mortgages, pre-loan counseling is necessary to ensure that consumers are aware of the risks and can weigh their options.”

This article was generated using HousingWire Automation and reviewed by a HousingWire editor before publication.