The July 2013 issue of the “Mortgage Banking” magazine focuses on the Consumer Financial Protection Bureau (or “CFPB”). The coverline is this: “CFPB – A Powerful New Overseer.” Why my interest in this issue and coverline? In the past, commercial lenders (and their lawyers) blissfully ignored anything involving consumer lending. We quickly distanced ourselves from any meeting involving discussions of consumer loan documentation, compliance audits, data collection (and access), and the byzantine consumer lending regulations. Residential lending was . . . but not really . . . but really . . . the “other side” of the lending family. This is changing. The residential obsession (on rules, lending policies, data collection and compliance inquiries) will radically change commercial lending. It is more than a shadow on the wall. In every industry meeting attended by me in the past year, anticipating the impact of the CFPB upon commercial lending is a top-tier topic. Although not a formal agenda item, the discussions are not “if” this will occur – the discussions are “when?” Leaders (on the commercial lending side) are anticipating the need to adopt some of, if not mirror, the CFPB requirements. This will require new lending rules and lending policies, with requirements for expansive loan level data, rich data mining and new compliance policies and procedures – with the ability to alter procedures and generate “new” reports upon demand (or at least quickly). Here are some of the drivers behind extending CFPB principals to commercial lending:
- Other governmental authorities and industry regulators will perceive value in the CFPB approach (“since they’re digging into this on the consumer side, why aren’t we doing the same on the commercial side?”)
- Investors will demand similar treatment (“why can’t the commercial side have the same focus on policies, rules, loan level transparency, and all that stuff – which we’re paying for”)
- Supporting technology tools already are available (“what’s so hard about modifying these new tech tools for commercial investments?”)
No one questions whether the shadow is real. The focus is “when” will the shadow push the residential table into the same room as the commercial table. (Or maybe it’ll be the other way around.) No more distancing ourselves from Cousin Eddy – we’re going to eat a lot of meals together. Please post your comments below.