The director of the Consumer Financial Protection Bureau listened to the concerns of Arkansas lenders and business leaders in Little Rock on Thursday.
Kathy Kraninger, who took the helm of the agency in December 2018, joined U.S. Rep. French Hill, R-Ark., for a listening session at the University of Arkansas Cooperative Extension Office's Little Rock location.
While the primary consumer complaint to the bureau from Arkansas relates to credit reporting, the chief topic of conversation at Thursday's session centered on mortgage regulations stemming from the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
Kraninger said sessions like Thursday's gave her meaningful perspectives that often get lost in "theoretical" discussions in Washington, D.C.
"It's good to talk to people who solve real problems," she said. "You get some good ground truth."
Thursday's listening session was one of two events last week in Central Arkansas that Kraninger participated in, alongside Hill. Chuck Harder, Arkansas deputy attorney general of public protection, joined them Thursday to gather information. On Wednesday, Kraninger and Hill, who serves on the House Committee on Financial Services, met with more than a dozen community bankers from Arkansas.
Kraninger also met with participants in the ICBA ThinkTech Accelerator program at the Little Rock Venture Center.
Kraninger is only the Consumer Financial Protection Bureau's second Senate-confirmed director. Mick Mulvaney, now President Donald Trump's budget director and acting chief of staff, led the bureau in an interim capacity.
The bureau was created by the Dodd-Frank Act as a regulator for consumer financial products and services. It also has an educational component for consumers focused primarily on financial literacy.
Hill said that since being elected to Congress in 2014, he has tried to bring federal directors -- including the secretaries of Housing and Urban Development, the U.S. Air Force and Department of Veterans Affairs -- to the state to hear from his constituents.
"I'm glad to have our federal agency heads come to Arkansas and interact with Arkansas citizens, taxpayers, businesses, consumer groups, because I think they do a better job when they get out and visit with ordinary citizens," Hill said. "I think it's an incredibly important part of their job to hear these people tell them directly what they're seeing as the impact of the rules."
Much of Thursday's listening session centered on a regulation that stemmed from the Dodd-Frank Act. The regulation requires that borrowers on qualified mortgages must not take on monthly debts in excess of 43% of their pretax income.
The regulation aims to follow principles of the sweeping federal legislation that was passed in response to the 2008 financial crisis to protect homebuyers from taking out mortgages beyond their means.
However, some argue that there have been unintended consequences. Scott MacFarlane, executive senior vice president of CIS Home Loans, highlighted to Kraninger that the debt-to-income regulation had harmed many rural residents who were unable to secure loans to purchase manufactured homes.
He noted that instead of paying $250 per month on a loan for a mobile home and receiving equity, those people are forced instead into renting an apartment at a greater monthly cost without any opportunity to build equity.
Hill agreed the situation involving manufactured homes was an example of the Dodd-Frank law's shortcomings.
"[Manufactured housing] is part of life in rural America," Hill said. "This is just lost on the vast majority of members of Congress who represent urban areas."
Kraninger in a letter to Congress last week said her agency wished to amend the 43% debt-to-income threshold rule. A number of the nation's largest banks have pushed for a change to the rule.
A major complaint of banks has been that Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corp.) are not bound by the same requirement and therefore have an unfair advantage.
Metro on 01/27/2020