ACUMA ONpoint
ACUMA ONpoint
Navigating Financial Regulation Shifts and Housing Policy Changes
What if the next big shift in financial regulation is just around the corner? Join ACUMA President Peter Benjamin as he sits down with Zach Pfister, Policy Director at Brownstein Hyatt Farber Schreck, LLP, to navigate the complex policy landscape shaping the credit union mortgage industry. Together, they unravel the intricacies of Washington, D.C.’s current political climate, including the short-lived extension of government funding by the 118th Congress and the modest scope of the National Defense Authorization Act. Zach offers his expert analysis on the missed opportunities and the looming challenges that await as we head into the new year, with potential seismic shifts in reconciliation packages and tax reforms. The conversation delves into the potential restructuring of regulatory bodies like the CFPB, though such changes face significant hurdles. From housing policy to financial regulation, they assess the strategic implications for the credit union mortgage industry and how legislative efforts might evolve with the new administration's focus on housing affordability. Don't miss out on this insightful episode! Sponsored by Lender Price.
The views and opinions expressed in this podcast do not necessarily reflect the views or positions of Acuma, its board of directors, its management staff or its members. The podcast discussion presented is conversational in nature and for general information only.
Speaker 2:Hello and welcome to Atkins On Point Podcast, the policy series where we focus on policy issues impacting the credit union mortgage industry. I'm your host, peter Benjamin. Today's episode is being brought to you by LenderPrice, the most modern and proven product and pricing engine in lending. Whether it's enhancing the pricing experience or efficiently matching homebuyers with the ideal loan program, lenderprice empowers all credit unions to excel and innovate in today's dynamic market. Their cost-effective pricing engine provides modern APIs that deliver seamless integrations, full product and rate support, custom workflows, and it's simple and easy to use for loan originators. Lenderprice is proud to sponsor the Acme On Point podcast policy series, where discussions on the policy issues impacting credit union mortgage lenders take center stage. Get to know LenderPrice and book a demo at wwwlenderpricecom. Lenderprice and book a demo at wwwlenderpricecom. Joining us today as our resident expert is Zach Pfister, Policy Director, with Brownstein, zach, my friend, how are you doing today?
Speaker 3:I'm doing well, Peter. We're getting close to the holidays.
Speaker 2:Not only that, we are getting close to closing out the year, and what a year. It has been filled with ups and downs, not just because of the housing industry, but most certainly because of the political and policy environment, which is obviously why you are here. So here we are, december, officially the last policy episode of the podcast of the year, so let's dive in. What is the latest and greatest happening in DC that we need to talk about?
Speaker 3:Well, where do?
Speaker 2:we start. Let me take a step back and I'm sorry to interrupt you. I'm not necessarily sure if latest and greatest is the best use of the phrase, but let's just jump what's going on, let's just say what's the latest.
Speaker 3:I don't know how great things are in DC right now. So we are at the tail end of the 118th Congress. There is a government funding deadline that expires on Friday. The House and Senate finally announced a deal to extend government funding for a grand allotment of three months. It took them the better part of the last three months to extend it for another three months. This was kind of deemed all along the line of negotiation as what's known as a continuing resolution, which generally is pretty clean.
Speaker 3:This CR is really anything but. It's 1,500 pages long. It includes plenty of other packages or, as we like to say, christmas ornaments, doing exactly what the House and Senate leadership in some respects were claiming to avoid at an end of the year omnibus appropriations bill. What they got was an end of the year continuing resolution that still turned into a relatively modest Christmas tree carried along health care packages, packages related to China, outbound investment funding for the Francis Scott Key Bridge that was destroyed recently so kind of a hodgepodge of it was destroyed recently, so kind of a hodgepodge of backlog that needed to be dealt with. And this is this is par for the course. So it's not it's not surprising in any respect Very limited on financial services provisions. However, looking into next year, this CR will go to March 14th. Congress will then again be tasked with going up against that deadline and dealing with this all over again. They also are in the process of passing the National Defense Authorization Act, which is set to be considered by the Senate today. That bill similarly always a large bill didn't carry as much this year as it as it typically can, which is why the continuing resolution government funding bill ends up with more more ornaments than the NDAA I know there was.
Speaker 3:Throughout the negotiation. The trigger leads bill was was in the mix. It was. You know it was. It had a good shot because it was a Senator Reid, chairman of the Senate Armed Services, it was. His bill in the Senate ultimately did not make the cut.
Speaker 3:I don't think the issue goes away. I think it will live to fight another day. However, it sounds as if there were some last minute concerns or maybe not last minute, but some advocacy from the credit bureaus attempting to potentially change some of the language that ultimately couldn't reach resolution among the stakeholders involved. So that dropped out. But from there Congress is set to leave on Saturday. Friday we'll see. I don't think anyone thinks that they will be here next week, but they will pick back up in return on January 3rd for what will be a, by all accounts, a very full, potentially chaotic first couple quarters of next year. We've got one or two reconciliation packages coming down the pike, with tax reform being a centerpiece as well, so plenty of opportunities to engage, but plenty of potential threats in that mix as well when you get into these gargantuan bills, especially around tax, as we all know.
Speaker 2:So you know two questions. You know one's going to be on trigger leads and one's up and one's on really just kicking the can you know. So let's start with you know kind of sort of kicking that. You know the budget, you know down the road and again, probably a stupid question, but you know, as we kind of just think about, you know the general makeup of what our government's going to look like, right, almost moving to a one not, it is moving to a one party system. Wouldn't it have? Just, you know, from a Democrat standpoint, wouldn't it have been to their benefit to find a way to get the budget to work? I mean, I don't know. I mean, why push it down the road? Why do that so like? Wouldn't it have been somewhat beneficial from a political standpoint to find some type of resolution, while there is some type of, you know, dual party system in play?
Speaker 3:So it was certainly an option on the table.
Speaker 3:It generally is you know, it is always an 11th hour situation. Part of this is due to the myriad competing interests. There were 10,000, over 10,000 bills introduced in this Congress, which ended up being one of the most least productive Congresses in recent memory, in part due to the very, very slim margins in both the House and the Senate and divided government. I mean, naturally, the Democrats and the Republicans have differing opinions on how government funding should look, so it often drags out the process. I would like to say that you know, despite an individual's position on certain public policy issues, that next year should be a smoother ride for government appropriations. I think it will be anything but the margins in the House are even smaller. So Republicans will have the first four months of the year a zero vote majority to 17 to 215. That means they can't lose a single vote because a tie in the House is a fail. So you know there are different camps within the incoming majority on spending issues and at the same time, on the other parallel track, they'll be trying to pass a tax bill that extends the Tax Cuts and Jobs Act, which the extension alone has a $4.8 trillion price tag. When you add on the campaign promises throughout the last year from President Trump that those new add-ons. They account for another $4 trillion.
Speaker 3:So these guys are going to be tasked with some significant challenges trying to pass tax cuts on one end of the spectrum but at the same time, trying to pass cost cutting within the federal appropriations process, the vast majority of which you know three of the $5 trillion in, you know, in the federal budget is mandatory spending Medicare, medicaid, social Security and it can't be touched.
Speaker 3:So they're working with a smaller pool on what those cuts look like and it can't be touched. So they're working with a smaller pool on what those cuts look like, which I think goes to round this out, goes to the threat around new tax revenue needed as an offset. And I think anyone, any industry stakeholder that has a tax status the credit unions, the foreign credit banks, whomever others in the not-for-profit space, others in the C4s, the C3s, the C14s everyone needs to be engaged on this front to ensuring that they are showing the value of that status and the ROI for consumers. Everything's on the table next year. So they'll be working with a big list and then winnowing down that list of what can pass muster in terms of revenue raisers, and credit unions don't want to be on that list.
Speaker 2:Agreed.
Speaker 2:I mean in general. I mean that's agreed. Credit unions don't want to be on any list, all right. So quick question on trigger leads. All right, so you had the Reed and Hagerty bill.
Speaker 2:Didn't make the cut for the NDAA, you know, reed Democrat, hagerty Republican, so it's very much bipartisan. Hoping that it will continue to be bipartisan, you know, and going into 2025. And, of course, moving forward. This is something that we we that we hope is doesn't go away. How?
Speaker 2:So, knowing that the credit bureaus you know were successful in their advocacy and having it pulled back from the NDAA, you know, from what you've seen in in, kind of just summarize things that we've talked about in the past, right, you know the current version of the trigger leads bill that was submitted. It was a opt in. You know, based off of the existing proof of the existing leads bill that was submitted. It was a opt in. You know, based off of the existing proof of the existing relation and relationship and a real estate transaction. Correct me if I'm wrong, right, right, that's right. How, based on what you understand, do you anticipate a large degree of change in any type of trigger leads going forward or do we? You anticipate it kind of just being the same exact thing, Just it wasn't the right timing.
Speaker 3:I think the latter. I wouldn't see any reason why it would change. It was a bipartisan bill with with some very strong co-sponsors. I would expect, given given Republicans being in charge of both chambers next year, that could help ease some of the regular order process on getting the bill back out there and through the committees and getting some movement on it. But you're right, you know the industry currently operates on an opt out. This would shift it to an opt in model. Industry currently operates on an opt-out. This would shift it to an opt-in model. The bureaus were pushing for more lenient language that still allowed some I don't know if you want to call it carve-outs or some flexibility, but the industry the banking, mortgage, credit industry that I think are unified on this front. I expect everyone to continue to push next year and I have no reason to believe that the sponsors won't continue to push as well. Arguably, you know, in what could be a more favorable financial services environment, given single part of it. Okay.
Speaker 2:Good deal. Appreciate that All right, so let's move on. All right, what else we got going on?
Speaker 3:What else don't we have going on, Peter I mean this is long and distinguished right.
Speaker 3:Yeah, so we have a new incoming chairman of the House Financial Services Committee, french Hill. He is a Republican representative from Arkansas. He is a former community bank CEO. He worked at the Treasury Department during the Bush administration. He's been on the committee for years. He served as vice chairman and stepped in as kind of acting chairman while Patrick McHenry was serving as Speaker Pro Tem during the speaker vacancy saga that we all enjoyed with some popcorn. It was just good television, regardless of what party you belong to.
Speaker 3:So he's got some true bona fides on banking policy. We expect him to approach his agenda next year when he has the gavel with a mindset of deregulation. He's had longstanding positions on digital assets and kind of promoting innovation in that space. He chaired the Digital Assets Subcommittee this past Congress. He's got longstanding views on exiting the GSEs out of conservatorship and he's got very conventional Republican views on the CFPB in particular, but also just on the regulators in general.
Speaker 3:So I know there have been a lot of conversations around deregulating the regulators or maybe potential consolidation of the regulators. Again, it's important to keep in mind that in one bucket you can have agencies that take a renewed approach towards going after the truly bad actors while providing regulatory relief for the good actors. And then, in the other bucket, you have this kind of narrative around consolidating the regulators or, as Elon Musk tweeted the other day, deleting the CFPB. These are statutorily established agencies. I don't it would take an act of Congress those votes are not there.
Speaker 3:I don't see a majority of votes in the House and 60 votes in the Senate to quote delete the CFPB, because what they would have to do is repeal Dodd-Frank and I think any institutions in this space realize that that is impractical and not least of which they've spent the last 14 years putting in place infrastructure and compliance regimes that adhere to myriad existing regulations, and scrapping that means putting a lot of this investment into question and creating new questions around compliance and regulation, and I don't think that's what stakeholders are necessarily looking for.
Speaker 3:I think they're looking for a break right. They're looking for opportunities that make sense on how they can better serve their members and their customers. This CFPB in the current administration has taken a very aggressive approach. The term overreach is often the preferred term, so I think we're going to see less of that. I am skeptical that we see a consolidation of the agencies and for other purposes. I'm not so sure that the regulated entities would prefer a consolidated regulator, that there are unique lived experiences and backgrounds of officials that work at NCUA and that work at FDIC and that work at CFPB, the thought of kind of consolidating them all under the Treasury Department. You know it just I'm not sure if that squares the peg.
Speaker 2:No, I mean, I agree, I agree with you and even when you think about, you know a lot of these things right and you focus on, you know, and you focus on specifically the CFPB and the idea of quote unquote, deleting them. Right, what are we really going to do if the CFPB goes away? Right, I mean, I do think on that point.
Speaker 3:I mean, I do think that you will see renewed efforts to rein in the CFPB in the form of, you know, reintroduction of legislation that would put the CFPB under a commission structure similar to the other regulators, and you may see efforts to put them under the federal appropriations process, similar to, you know, some of the other regulators. But those ideas have been around for a long time. It's just that they may, you know, gain some more traction in a one-party control situation. I still have doubts that they could reach 60 votes in the Senate, but I do expect that those conversations to bubble up again in the next Congress.
Speaker 2:Right, and you're not the first person we've talked to who said you know, instead of it being a one a one director system with the CFPB, it will more than likely be, you know, a board or a commission. Right, and instead of them pretty much being able to, you know, stick their hand in the piggy bank on their own, you know they have to go. You know, get approval for their funding, right, you're not the first person to say that and, odds are, if that's the process they have to go through, that's not the worst thing on earth. It's really not right. But the idea of them pretty much doing away with the CFPB, that's probably not the best idea, because, in theory, we're not going to stop following TRID. Why would we?
Speaker 2:We've invested billions of dollars, right, and let's think about it. Right, I mean we've invested billions of dollars in TRID, atrqm, hmda. I mean we can keep going down the list of things that we've invested billions and billions of dollars. Right, and what are we really going to do? Are we going to start laying off our compliance people? No, we're not. We're really not right. We're not going to lay off our QA staff.
Speaker 1:We're not.
Speaker 2:Right.
Speaker 2:It's we're not going to go back to the wild west of paying our LOs whatever we want, right, we're just not going to. It's so, it's, these are the things that it just. We're not going to change the way to see some of the things that the CBB has put into play. They're just, we're just, it just doesn't make sense. But anyways, you know now. You know the rumor floating around about the bank regulators consolidating that one's interesting right. It doesn't make sense, no, it doesn't. I don't know why they, why that's even floating around like it is.
Speaker 3:It's part of an overall kind of narrative with the, the doge, the doge efforts, the department of government efficiency that's not actually a department, but will put forward recommendations, uh, in in 2026. So there are all these ideas floating around that be funneled into um. You know, this report report a year and a half from now and there will be a subcommittee on House oversight established that may attempt to, you know, put some of these in into the form of legislation or legislative proposals. So we shouldn't be surprised to see somebody drop a bill that may seek to consolidate, but the reality of the situation is that it would take an act of Congress and I just don't think Congress has the ability to act.
Speaker 2:And that's the thing. It's like political capital, right? Oh, it's. You know, I can say this because I'm not a government insider, right, and I consider you a, you know, a DC insider. But I can say this, like, like you have all these people who are new to Washington coming in, you know, and they may be from, you know, california, and they may be from a tech firm, they may be from New York and Wall Street, coming in and advising the new administration, or they may be an ex football player who knows, but they're coming in and they're providing this guidance and they have no idea how DC works and how long it takes for things to go through, right, and they have no idea why things have been put in play in the history of things, and they just come up with these random ideas, right? Well, I don't like the CFPB. I don't think the FDIC, occ and the NCUA should be their own entities. Let's just consolidate them. It just makes more sense, it'd be more efficient.
Speaker 2:Well, no, because in theory, credit unions are different than banks, right? Large banks are different than community banks, right, I mean? Or smaller banks, right? They all operate slightly different. So you really don't even want to consolidate them, right. Why would you want to consolidate Wells Fargo into the same exact banking regulator as you would a local community bank, right? Or even, why would you want to consolidate Wells Fargo into a local credit, the same regulator as a local credit union, right? That just doesn't make sense, right, right? So, anyways, all right. So let's move on, just for the sake of time. I think we have two rules. One has recently become final. One is currently in that proposed state. Let's start with the one that has recently become final. One is currently in that proposed state. Let's start with the one that has recently become final.
Speaker 3:So just yesterday the CFPB finalized its PACE financing rule, which stemmed out of a requirement of a regulatory relief bill passed out of Congress and signed by President Trump at the time, commonly referred to as S-2155. That's the bill number that it left the hill with signed into law. It does a few things. At its core, it establishes and prescribes ability to repay requirements for residential PACE financing. It recognizes PACE financing as kind of meeting the definition of credit under TILA and Reg Z credit unions, banks or. The problem here over the years has been that a homeowner takes out a renewable energy loan or home improvement loan, such as PACE that put new solar panels on the roof, et cetera. It takes primacy on the mortgage lien. If the individual didn't actually have the ability to repay, that's the first lien paid out, which probably implies that they wouldn't be able to pay out their mortgage requirements. And I'm not certain where this final rule lands on the next administration's agenda. It is from a bill that President Trump supported during his first term in office. He signed it into law. I think it's potentially up for some examination. We need to go back through the details it just came out yesterday about. Let's see it could be, I'm sure put something. The details that just came out yesterday about the safety. I'm sure something in there that they're that the new administration is not going to like. But this falls within the. This falls within the. You know, the six month give or members on the Hill who were not around in 2018 when this became law, to execute on an effort to repeal this rule. There are also there's also a likelihood that this rule, along with every other rule, will be frozen on January 20th for further review. So we'll see where this goes. But the final rule takes effect on March 1st. The president takes office on January 20th. So we'll see kind of where this lands on the agenda for Congress and the administration. But I think that there are a handful well, more than a handful a litany of other rules across the federal bureaucracy that the administration is probably going to take aim at first.
Speaker 3:The data broker rule is the other rule you're referring to. Now. This is a proposed rule. It it will likely. I cannot see it surviving. I don't see. I don't see the incoming CFPB, the incoming administration, even moving forward on it.
Speaker 3:It's just to to your point about our earlier conversations about compliance and the like. This kind of checks the box on all of those. It creates more confusion in terms of compliance on credit unions and banks. It deems basically any data broker handling personal information as a credit bureau, um, so it kind of expands. You know who would fall under the fair credit reporting act? Um, and it and it's again, it's still in its proposal stages, so the comments are due by March 3rd. I just don't assume that that's going to stick, because I think that this won't be one that's probably frozen and may not be unfrozen, um, it may just be withdrawn. But you know, I think that there are several impacts on industry sectors, kind of across the board Compliance costs and changes on this front being, you know, most notable. But where they go from here on next steps, I think, is fully up to the administration and whoever the new CFPB director will be. I just do not see this incoming government or the Republican Congress entertaining this one prior to us jumping on this podcast.
Speaker 2:This is a good example of how it's a very confusing proposed rule where you have the current CFPB talking about junk fees and the rising cost of anything. We'll focus on mortgage right, the rising cost to obtain a loan. This is a good example of and I'm going to add one more point, and just about a month ago, the credit bureau was coming out saying that they're going to raise their costs. But this is a good example of something else that the CPB could potentially put in play. Yes, it's going to die in the vine, but this is something that could potentially be that the CVV could put in play. That would most certainly raise the cost to the consumer for the individual transaction, because the lending institutions, the financial institutions, banks, credit unions, the individual non-bank lenders are not going to eat that cost. They most certainly are not Because they can't. They're just not going to eat that cost. They most certainly are not Because they can't. They're just not going to. I mean.
Speaker 2:And so it comes back to it. It seems to be, you know, two sides of the same coin. You're telling us to reduce our costs, but yet now you're going to increase the cost because of this rule and it just doesn't make sense. And I keep asking this. I always ask the same question why, why? Just doesn't make sense? And I keep asking this. I always ask the same question why, why, why now? Why push this forward? What's the point? You know, here we are. You know, end of december, come on, man, you got like one month left, not even, not even come on. It's like why, man, come on, come on, it's like whatever. And so, yeah, it's interesting and but I get it, I just don't understand it, right, yeah?
Speaker 3:look part of. It's a legacy thing, um and uh, you know, in in future, in future democratic administrations and democratic cfb's. It's a, it's a kind of a roadmap. Um, it's not uncommon for, you know, these administrations when, when they change hands, it's not uncommon for the next time that there's a party in charge, that the next time there's a Democratic administration, it would not be uncommon for them to kind of use this federal government where the Obama administration put in a rule, the Trump administration repurposed it and the Biden administration repurposed that rule to reflect the Obama administration rule.
Speaker 3:And just like this game of ping pong, this happens a lot over. Like the Department of Labor, for example, where you know how many versions of the fiduciary rule have there been, right? I think we're on four or five at this point, and they just start assigning a number behind right. Like we're on fiduciary rule 4.0, right. And then there's this, you know the subject of litigation, which obviously I think this one would be right for that as well, but I just don't. I don't think it's it's, I don't think stakeholders should lose too much sleep over it, because the compliance burdens are evident, the expansive definitions are evident, the limitations around you know consumer header data are evident in what the you know, in what those impacts would have on lenders, and it's it's, it's it's banks, on lenders, and it's it's, it's it's banks, it's credit unions, it's fintechs, it's housing providers, it's expansive and you know, just, I, just, I think, I think it's probably going to die on a vine, like you said you know.
Speaker 2:And going back to pace lending, you know this, you know this is something that you know, lending trades, mortgage trades, have been advocating against, you know, for quite some time. You know, yeah, atrqm is a big part of it, but you know it's. It's also lien placement has always been a big part. But I think one of the biggest, biggest things that they've always advocated against was if you're, if you are going to take first lien position, you better have, better be able to repay. That's right. That's right. You will prove that you, that you've qualified these borrowers. Um, you know, firstly, position is one thing you know. But if that borrower defaults and you didn't properly qualify them, that that's a that's a different story. Um, okay, so you know, for Zach, we have to start closing out. Any final thoughts before we actually do? I mean, it's been a whirlwind year, whirlwind year, excuse me. Any final thoughts, any foreshadowing for next year?
Speaker 3:No, I think it'll be a jam-packed year. You'll have two kind of parallels running on the same track, right? You'll have the traditional regular order process where you'll have House Financial Services and Senate Banking putting forward proposals kind of across the capital markets, housing, digital assets, space, regulatory relief being an undercurrent, supporting innovation in these markets being an undercurrent of that. And then you'll have the reconciliation process, which you can only use when you have full party control, because a bipartisan reconciliation bill is unfathomable in this day and age. But it is an instrument that allows for big, bold legislation or the party crafting it to circumvent certain requirements around vote thresholds. Circumvent certain requirements around vote thresholds, particularly in the Senate, where you can rely on a majority vote rather than the 60-vote threshold. It makes things a lot easier to pass big law.
Speaker 3:Again, I'll just reiterate these bills tend to be significant, they tend to be costly and they tend to open up a lot of, a lot of code, us code at the same time. Right, and I think that's why all stakeholders are monitoring these efforts, both from the lens of opportunities but also from the lens of potential threats, because there's only so much money this Congress, this incoming Congress, will be willing to spend without offsetting it somewhere else, and that those offsets are where we you know, we as stakeholders across industry sectors, you know run the risk of, you know, having policy debates around longstanding precedents whether it's a tax status or whether it's something else and ensuring that those priorities are solidified as well.
Speaker 2:Okay, I mean it's going to be interesting, right, and just last question. And then we do have to close out. I mean, I know the new administration and with all the crazy things that are being thrown out on social media, but when we actually boil down to the real nuts and bolts of things that actually have to be considered, priority is a housing policy, affordability and the things that we have to do to actually take care of the country when it comes to housing and getting people in homes. Do you foresee next year, the next two years? Is this a priority?
Speaker 3:Absolutely so. Senator Tim Scott, who will be chairman of the Senate Banking Committee next year. He recently released a kind of a comprehensive housing bill. It focuses definitely more on the streamlining, cutting of red tape, regulatory relief front than it does on the incentivization side. However, I think it's a starting point, starting point. French Hill, again probably the most intelligent financial services person on Capitol Hill. He will have his own ideas. It's hard to envision the policymaking process next year without some significant efforts on housing policy. Again, we already discussed the interest in looking at the GSEs and exiting them from conservatorship, so it will certainly be in the debate. Housing affordability is a bipartisan issue. How policymakers go about it. They have different viewpoints, but I would near guarantee that we see some big proposals coming out next year that we should keep an eye on.
Speaker 2:I appreciate it Well, zach, as always, greatly appreciate everything that you do for Acuma. Our members Always enjoy our conversation on our policy episodes. Thank you very much and, of course, hope you have a great holiday. All right, you as well. Thank you very much and, to close out, thank you again to LenderPrice for sponsoring our policy series and all of you. We know your time is valuable. Thanks for tuning in to the latest episode of Acuma's On Point Podcast. We hope you enjoyed it.
Speaker 1:Until next time be well, my friends.
