Big Changes Coming to the Consumer Financial Protection Bureau's Sway in the Mortgage Industry as Trump Moves into the White House.
Although it's still too early to say with certainty what Trump has in mind for the housing industry, the possibility of significant regulatory change looms – especially over issues Republican policymakers have long been fighting, including banking and financial services oversight by the CFPB. The new administration is unlikely to oppose GOP plans to correct some of the perceived deficiencies in the Dodd-Frank Act, according to a statement made by Joseph Lynyak III, a partner of Dorsey & Whitney LLP, an international law firm and specialist in the inner workings of the CFPB.
According to Lynyak, now that the Republicans control both Congress and the Executive Branch, they may decide it's time to move on their unsuccessful past proposals for regulatory reform.
This might include a second look at the CHOICE Act, introduced by Jeb Hensarling (R-TX), chair of the House Financial Services Committee, in the summer of 2016. The thrust of the act is to replace Dodd-Frank and reform the CFPB.
Lynyak further explained that necessary reforms to the way the CFPB works may include a commission structure, where the funding is under Congressional control. He added that the current authorized penalties used by the CFPB may also be reformed.
Other options could include a Congressional appropriations process for the CFPB, or possibly moving from a single-director agency to a multi-member commission-based backbone.
Benjamin K. Olson, a partner of Buckley Sander LLP in Washington, D.C., suggests that change by way of small steps is more likely than any major change, and he further opines that that may be exactly what will happen.
Olson's relevant experience includes a prior appointment as the Deputy Assistant Director for the Office of Regulations of the CFPB, responsible for creating seminal mortgage industry regulations such as TRID (TILA-RESPA Integrated Disclosure rule) that went into effect on October 3rd, 2015.
Olson is presently serving his clients in an advisory capacity regarding CFPB mortgage and credit card regulatory compliance, focusing on Dodd-Frank and TRID. Olson believes that dramatic change will be a real challenge for the new Congress and President, mainly due to the fact that the mortgage industry has invested so much into compliance systems and training under the new regulations. He thinks that while repealing the rules may have benefits, the decision may also leave gaps that would feed a degree of uncertainty into the mortgage industry.
Completely dismantling the CFPB would face some stiff opposition from Senate supporters like Senator Elizabeth Warren (D-MA), a vocal advocate for the agency in statements she made to the AFL-CIO (American Federation of Labor and Congress of Industrial Organizations) made on November 10th, 2016.
Because the current CFPB Director Richard Cordray's term ends in 2018, the CFPB will see new leadership under the Trump presidency.
Even if no changes are made in Congress between now and the end of Mr. Cordray's term, a new leader will bring fresh perspectives and different views on how the CFPB will carry out its mandate.
According to Mr. Olson, the Bureau (CFPB) “has a large staff that has been hired over the last five years and obviously is committed to (their) mission,” and despite their differing views, a change in leadership doesn't have to mean consumers will lose their protection.
One philosophy is to put more emphasis on creating deterrents to protect consumers while simultaneously creating incentives for institutional compliance. Another strategy is to provide consumers with the tools necessary to make informed decisions and protect themselves.
A change in leadership might simply mean that the new director puts more emphasis in certain areas rather than scrapping the current strategy altogether.
Cabinet posts that directly impact the mortgage industry will change after Trump is inaugurated on January 20th. These include leadership roles for the FHA (Federal Housing Administration) and the HUD (US Department of Housing and Urban Development).
Certainly there has been much hand-wringing and speculation regarding the potential downside of a Trump administration, yet groups like the MBA (Mortgage Bankers Association) have expressed support and called on the President-Elect to keep a focus on the main issues facing the U.S. housing market. They have pledged to work with the new Administration and Congress, with an eye on moving housing forward as a key economic driver for individual and national wealth creation.
The MBA has asked Mr. Trump to focus on an adequate supply of affordable housing, getting first time buyers back into the market, and ensuring regulatory certainty. They want the new administration to ensure long-term access to financing for qualified buyers, while bringing back balance and prosperity to the market.
On Thursday, November 10, the Trump transition team announced plans to replace the Dodd-Frank Act.
The reasons cited for the change are the unintended consequences of Dodd-Frank: “big banks got bigger while community financial institutions have disappeared at a rate of one per day, and taxpayers remain on the hook for bailing out financial firms deemed too big to fail,'”. Further, “The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.”