The United States Consumer Protection Bureau (CFBP) is a new agency accountable to no one, created by the Dodd-Frank financial legislation of 2010, and conceived by our long time Fairy Godmother and new Senator from Massachusetts, Elizabeth Warren.
I apologize if I seem a bit cynical and despondent at having to pay for a Federal agency whose primary purpose is to require providers of credit to be responsible for the inability of their customers to assume responsibility for the loans they freely enter into. So, as we now all pay to protect the stupid from their stupidity, please indulge me while I point out the absurdity of it all.
As recently pointed out in the Wall Street Journal, the Dodd-Frank financial-regulatory overhaul amended existing lending laws by making banks legally responsible for determining that a borrower has the ability to repay a mortgage.
The CFPB is charged with spelling out how banks can satisfy the new mandate. The "qualified mortgage" definition being issued by the agency essentially says that if a loan meets certain criteria, then regulators—and courts—will assume it was appropriately underwritten. Clearly, banks will not underwrite "unqualified mortgages" for fear of being sued or fined for less than responsible lending as seen through the eyes of the CFPB.
Under proposed rules from CFPB, loans would be deemed "qualified mortgages" if borrowers are spending no more than 43% of their pretax income on monthly debt payments.
Understand this clearly. The government is saying that in order to assure our nation's financial stability, a person wishing to borrow money to buy real estate will not get a mortgage unless the monthly debt payments (the amount borrowed plus interest paid in installments over the term of the loan) total less than 43% of the borrower's monthly pretax income.
Now for a short reveal on our Federal fiscal standards.
The Federal Government has recently been taking in less than $3 trillion a year in income while spending about $4 trillion a year. I refer you to pages 26 and 27 of Mr. Obama's 2013 Federal budget historical tables.
If the Federal Government were held to standards it insists upon for mortgage borrowers it would only be able to borrow an amount supported by the required annual repayment of principal and interest at no more than 43% of its annual income.
If the current debt were managed as a mortgage loan under the 43% CFPB income standard, the federal government would have to pay off over $1 trillion of debt and interest a year out of its less than $3 trillion annual income, and it would receive no further credit. Yet, the federal government is not paying off any debt but instead is borrowing an additional $1 trillion a year, adding to our current $16+ trillion debt.
But, I ask, what ab0ut our nation's financial stability? Perhaps the United States Consumer Protection Bureau and Elizabeth Warren can protect us from the government.
Regards, Pete Weldon