MBA Letter Urges Improvements to Bureau Financial Education Programs

Mike Sorohan msorohan@mba.org

July 11, 2018


The Mortgage Bankers Association said the Consumer Financial Protection Bureau should improve its delivery channels for dissemination of its financial education programs and eliminate its flawed "rate-checker" tool for consumers.

MBA Senior Vice President of Residential Policy and Member Engagement Pete Mills said the Bureau's financial education programs ensure consumers are always in the position to make informed financial decisions or choices. "This in turn helps reduce instances of delinquencies and foreclosures, thereby promoting the positive factors related to sustainable homeownership," he said.

The letter represents the latest MBA response to a series of Bureau Requests for Information on its practices; this particular response results from a Bureau RFI on its financial education programs, of which it is mandated to conduct and support under the Dodd-Frank Act. The Bureau promotes these programs through online tools, print publications and community collaborations.

The MBA letter notes many of the Bureau's financial education programs have focused on very useful topics for consumers. For instance, addressing issues that educate a consumer on the important considerations that need to be taken into account before getting a mortgage is particularly important because it makes the mortgage process easier for both the consumer and the lender. In addition, topics that address credit scores and reports, managing spending, and generally promoting financial well-being are appropriate and useful topics for consumers.

"It is important that the Bureau's programs not only educate consumers on the importance and intricacies of mortgage shopping, but also encourage consumers to seek financial advice on an on-going basis (even after a mortgage loan has been obtained) as a way to help promote financially responsible behavior as well as reduce instances of delinquencies, defaults and foreclosures," MBA said. "Such education should also focus on the integral role a mortgage servicer can play in offering assistance to struggling borrowers and encourage borrowers to reach out to their servicer before they are delinquent."

The letter noted the Bureau's delivery channels have been limited and said other delivery channels that could be used in addition to the on-line channel, which would ensure a "more robust and far-reaching delivery" of these important consumer tools. For example, MBA said recorded (downloadable) sessions could be more useful for consumers who do not want to spend time reading information posted on the Bureau's website. "Also, in-person (or classroom-type) methods or community educational events can also be very useful for reaching individuals who learn better in a face-to-face setting," MBA said. "Thus, organizing periodic educational events in communities where it would be beneficial to consumers would help expand the Bureau's delivery method."

MBA also encouraged the Bureau to find ways to advertise the availability of these financial literacy educational programs, as well as the available delivery channels to consumers, such as advertisements in communities where little is known about the availability of the programs, on the radio, television, posted flyers, at libraries, health clubs and gyms, as well as community centers.

"A robust awareness campaign, as well as a wider avenue of delivering the programs would certainly promote more informed/educated mortgage borrowers, resulting in higher rates of completed mortgage applications and lower rates of early payment delinquency or default," MBA said. "The widespread advertisement of the availability of these important programs as well as the various delivery channels will help ensure that the intended recipients of the program are aware of its availability, and also help the Bureau achieve the intended objectives of its consumer educational program."

MBA recommended the Bureau consider partnering with housing counseling agencies that have been working on helping consumers navigate and understand the intricacies and complexities of being a prudent borrower/homeowner. "Such a partnership should be structured in a way that allows one program to complement the other, rather than duplicate or compete," MBA said. "The goal is to promote prudent homeownership as well as provide financial literacy support for individuals who need it. Thus, a partnership with counseling agencies that have the staff, structure and capacity to help meet these goals can only add (and not diminish) this important function of the Bureau."

MBA noted while the Bureau has improved its Explore Interest Rates Tool ("rate-checker") that remove negative messaging about lenders and about other interest rate calculator sites, flaws remain, including underrepresentation of Independent Mortgage Bankers in the institution sample, wide range assumptions about discount points (from -0.5 to 0.5) that limits accuracy, exclusion of information about private mortgage insurance and loan level price adjustments, and exclusion of the Taxes and Insurance component of the monthly payment.

MBA noted while shortcomings exist with other rate calculators, it remains unclear what real additional value a Bureau rate calculator really adds. "In some respects, the rate-checker tool is more of a problem than help for both lenders and consumers," the letter said. "Regardless of the caveat clearly telling consumers not to solely rely on the results of the rate-checker, many consumers still do. This creates unnecessary complications down the road when the mortgage loan is processed and the rate differs from (i.e., is higher than) that produced by the rate-checker."

MBA said while it is understandable that the Bureau's intent in providing the tool is to equip consumers with useful information as they compare and consider their loan choices, by focusing consumers on the rate checker, the Bureau website misses the opportunity to educate consumers about how to shop for a mortgage. "Rather than a rate checker that is inherently limited, a better approach would be to provide consumers the ‘10 Questions you should ask every lender when shopping for the best mortgage,'" MBA said. "This would ensure that consumers ask the critical questions about nuances like PMI, rate lock period, discount points, other fees, processing times, taxes and insurance, etc. It would also ensure they collect the same information from each lender they shop."

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