Democrats, CFPB Collide on Mortgage Rate Benchmark

A threatened cut to the Consumer Financial Protection Bureau is drawing alarm from Democrats who fear an impact on the housing market.

This week, lawmakers led by Sen. Elizabeth Warren wrote a letter to the agency’s acting director pushing against funding cuts for CFPB, Bloomberg reported. The Trump administration has been dismantling the consumer watchdog since the beginning of his second term.

At the heart of the letter is the fate of a weekly publication of the Average Prime Offer Rate tables. They set the permissible rate boundaries for “qualified” mortgages that comply with repayment standards created by Dodd-Frank. The benefit is twofold: lenders are protected from legal liability if loans within that boundary go bad and the market sees less risky loans.

But last month, the agency revealed in a court filing that it would run out of funding early next year and lacks a way to replenish those funds. That would curtail the ability to publish the APOR tables, which rely on survey data from several mortgage products and have facilitated millions of loans.

“If the CFPB stops publishing standardized APOR tables, lenders might not make loans to lower-income borrowers,” the letter stated. Consequences could include “skewing the cost of homeownership and cutting off credit access for borrowers.”

In a trade publication, the bureau previously stated that it “intends to publicly spell out a different way to calculate APOR” to give lenders more discretion and less enforcement pressure, which Democrats said was a “half-baked idea.”

But Democrats pointed out that the Trump administration is aware of the APOR’s value, having exempted it from a work stoppage across the agency back in February.

The loss of APOR is not the only threat that could upend the $13 trillion mortgage market.

All eyes are still on the long-awaited initial public offering of government-sponsored enterprises Fannie Mae and Freddie Mac, which underpin much of the nation’s mortgages. Pershing Square chief Bill Ackman recently cautioned the administration to seek a safer route to unlock value at the companies.

— Holden Walter-Warner