If it seems odd to need a formal agreement for various regulators to cooperate, then this moment may signal a shift away from the bad old days of the financial industry's relationship with governmental bureaucracy.
In the mortgage area, the big change will be supervision of non-depository, in other words non-bank, mortgage lenders and servicers. "This agreement allows us to bring thousands of financial service providers out of the shadows and to begin the process of ensuring that all lenders comply with the same basic rules," Warren, who is special advisor to the Secretary of the Treasury, said in a statement announcing the MOU.
The team working to set up the Consumer Financial Protection Bureau (CFPB), led by Warren, who will likely
Thomas Gronstal, Chairman of the CSBS, said this is a "step toward a more cooperative system of supervision, which will benefit consumers and financial services providers alike."
The new rules developed under the MOU will take effect in July 2011. The rules will be developed under the consumer financial protection regime established by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The regulators seek to strike a constructive balance between federal and state regulation of firms.
Not only consumers who shop for a mortgage will see benefits from this MOU. Protections will also be spelled out for families seeking to finance their child's education or to provide some protection for people who take out payday loans that in some states have interest rates as high as 300 percent or more.
When the CFPB finally opens its doors, it will be the first federal agency with the sole job of looking out for consumers as they work within the financial system. State and federal regulators will work together to review businesses' practices and ensure that firms that provide consumer financial products, such as mortgages, are following the law.
How much protection you get will vary state by state. While everyone can count on the federal regulations set up in the financial reform legislation, some states have more stringent laws. You can find out more about your own state laws by visiting your state's consumer website.
For more on mortgages and related topics see these AOL Real Estate guides: