Tuesday, August 7, 2012

How Long is Too Long For a Rule?

National Mortgage News recently ran the story about Consumer Financial Protection Bureau Director Richard Cordray defending the newly released Mortgage Disclosure Rule. At 1,400 pages long, it’s been hard for many to accept that this is the path to simplifying the disclosures required under RESPA and TILA.

According to NMN:

"They have asked for more detail, more specificity, which ultimately means more pages, in order that they won't have lots of questions afterwards," Cordray said. "Why all these pages? Every one of those pages is trying to help solve problems that people have told us about."

There has been a lot of chatter across the social media spectrum about the rule, a lot of it expressing disappointment in the length of the document. While the rule could have come out a lot shorter, all of the FAQ pages and commentary that would have accumulated while regulators and the industry fleshed out the rule would have added up to at least as many pages.

That’s exactly what happened back in 2010. It’s hard to find anyone who thinks the way HUD dealt with the original changes back then was anything close to ideal. It wasn’t, but perhaps the biggest issue was that smaller institutions were forced to continually monitor the additions to the Agency’s FAQs in order to stay abreast of the most current interpretations.

In business and in life, if you know the rules up front you can make educated and effective decisions. I think that the small institutions that now see the "Mortgage Disclosure Rule" as long and cumbersome will come to realize that having the bulk of their questions answered upfront will allow them to adequately adjust their business practices to meet the requirements and create a more predictable and pleasant consumer experience - which is the ultimate goal of both the institution and the CFPB.

Have you read the rule yet? I’d love to hear what you think of it in the comments below.

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