Why are Democrats joining the latest legislative attack on the CFPB?

Two weeks ago a historic event unfolded during a little-noticed House Financial Services Committee markup: the launching of one of the first bipartisan legislative attacks on the Consumer Financial Protection Bureau (CFPB).

The attack came in the form of a bill developed by the manufactured housing industry, which gave it a remarkably Orwellian name – the “Preserving Access to Manufactured Housing Act.” In reality, the six-page bill, which was sponsored by Rep. Stephen Fincher (R-Tenn.) with support from Reps. Terri Sewell (D-Ala.) and Maxine Waters (D-Calif.), would roll back new CFPB regulations intended to protect purchasers of manufactured homes from absurdly high-priced loans.

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Who cares about manufactured housing? Well, millions of working families do – specifically the 18 million Americans who live in manufactured or “mobile” homes. For low-income families, manufactured housing is often the most realistic route to homeownership.  In expensive metropolitan areas such as Atlanta, Boston, Denver, the Twin Cities, New York, San Diego and the Bay Area, more than half of the manufactured homes are affordable to the lowest income households. Like most other homebuyers, those who own manufactured homes rely on loans to make their purchase. This is where the CFPB comes in.

Earlier this year, the CFPB issued new rules to ensure buyers of manufactured homes have access to safe, affordable loans.  Most manufactured homes are financed with personal property loans, like cars, rather than traditional mortgages, and the lenders have largely operated outside of federal regulators’ supervision. The CFPB regulations ensure that manufactured housing loans are subject to the same rules that apply to traditional mortgages, such as those stipulated by the Home Ownership and Equity Protection Act and Truth in Lending Act.

The Manufactured Housing Institute (MHI), a trade association for manufacturers, retailers and lenders in the manufactured housing industry, spent months trying to convince the CFPB to change the rules to reflect the industry perspective on the costs of doing business.  MHI argued that complying with the new rules would be so difficult that they would simply stop lending to many prospective buyers. However, CFPB officials reviewed the data provided by MHI and concluded that the regulations would have minimal impact on the availability of credit for buyers of manufactured homes.

Now, with this bill, Congress would overrule CFPB’s evidence-based rulemaking and mandate new standards based on the unfounded claims of an industry that stands to reap huge profits from the change. Not surprisingly, MHI has spent months lobbying House Financial Services Committee members on this issue and has contributed tens of thousands of dollars to congressional campaign coffers.  This is classic big guy versus little guy politics.

The CFPB is responsive to evidence; this bill is responsive to industry lobbyists. Who would you rather have writing your regulations?

To the industry lobbyists’ credit, they successfully attracted bipartisan support, including some traditional champions of consumer financial protection. Sewell led the charge with a lengthy statement in favor of the bill. Even more surprisingly, Waters, the ranking member of the Financial Services Committee, set aside her reservations and announced her endorsement.

What would cause these members to side with industry over consumers? Well, they wouldn’t put it that way. They argue that industry is hurting; that loans are drying up; that rural communities in particular are harmed by a stranglehold of bureaucratic over-regulation.

Such assertions, however, should be matched with evidence, especially since this bill enables lenders to charge as much as 18 percent interest for some home loans without offering additional protections that apply to “high cost” loans.  Under existing law, the CFPB is fully empowered to modify its regulations in the face of new evidence. But no such evidence has been provided.

It is unclear whether Waters and Sewell were simply duped by industry talking points or had other considerations in supporting the legislation. But it is clear that support of a bill to circumvent CFPB authority disregards the serious concerns loudly voiced by consumer protection groups.

This is how working families lose out; not with careful consideration of the data and the public interest, but in an obscure, politically-charged markup in room 2128 of the Rayburn House Office Building.

Rep. Keith Ellison (D-Minn.), the lone voice of reason in that May 7 congressional markup, raised some very reasonable questions: What is actually happening on the ground? How are consumers faring? How can we best support the manufactured home market?

Congress and the Financial Services Committee should consider these questions before overruling the CFPB with a vote for this bill next week.  If the evidence justifies changing or rolling back the regulations to help consumers, by all means do it.  But let’s allow the CFPB to make that call while guided by the evidence.

Ryan is director of Affordable Homeownership for the Corporation for Enterprise Development (CFED).

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