The Consumer Financial Protection Bureau (CFPB) has cranked out more than 2,400 pages of new proposed regulations since July 9th. That is a lot to review in a short period of time.
Let’s put this into context. The CFPB had two hours to draft each page starting from the date the Dodd-Frank Act became law. If you give the CFPB the benefit of the doubt and don’t start counting days until July 21, 2011, when the CFPB officially opened their doors, they had 50 minutes per page. Banks have 13 minutes to read, review, and comment on each page.
Arguably 13 minutes should be enough time to read and review a page. But at 13 minutes per page one person would have to spend eight hours a day every business day from July 9th (the date the first proposal was published) until November 6, 2012 (the date the last comment period ends) to complete the task.
A huge bank can assign a team to the task and complete it in a reasonable amount of time. Many community banks have a one-person compliance department, and often that person has other duties, in addition to compliance. There is no way such a bank can begin to seriously review all of the proposed regulations.
So what should a community bank do? All of the proposals are important. Implementing each proposal will strain both your time and dollar budgets. So pick one or two proposals that are of the greatest importance to your bank.
Based on the numerous complaints about the GFE and the HUD-1 I have fielded over the past 30 months, the issue of greatest concern may be the new forms that replace those old forms. The proposed rule for the Loan Estimate and Closing Disclosure covers 1,099 pages. Reading this monster, gaining an understanding of the requirements, and trying your hand at completing the new forms is probably more than a typical community bank can complete in the time allowed. But this may be the best use of a compliance officer’s time. We will likely have to live with the new forms for years to come.
Another proposal that may catch your eye is the one dealing with loan originator compensation rules. Anything that might impact the money a bank can pay to certain employees is likely to be high priority.
The CFPB has to play the hand they were dealt by Congress; that hand includes massive requirements and short timeframes. The CFPB is clearly trying to make this mess more tolerable for banks in general. But the short comment periods reflect either a serious lack of understanding of community banks or a lack of concern about whether they get input from community banks.
Community banks did not cause the mortgage crisis, but they are getting punished by Congress along with every other entity that has “bank” in it’s name, and they have very little say in the whole process. Nobody promised a fair fight.