ACUMA ONpoint
ACUMA ONpoint
Washington's Regulatory Rollercoaster: Inside the CFPB's Transformation
The regulatory landscape for credit union mortgage lending is undergoing seismic shifts, particularly at the Consumer Financial Protection Bureau. In this revealing policy episode, we explore Jonathan McKernan's unexpected withdrawal from the CFPB director nomination and redirection to Treasury, leaving Russ Vought to continue serving as acting director for potentially another 210 days under the Federal Vacancies Reform Act.
Our conversation with Policy Advisor AnnMarie Conboy-DePasquale of Brownstein Hyatt Farber-Schreck dives deep into the Bureau's recent dramatic pullback of 67 guidance documents, many from the Chopra era but some dating back to the Bureau's inception. This regulatory retreat includes withdrawing compliance bulletins on housing choice vouchers, COVID-era mortgage servicing guidance, and perhaps most significantly, policy statements that had expanded UDAAP interpretations and states' authority to enforce consumer protection laws.
The episode reveals how these changes align with the administration's commitment to eliminate ten regulations for every new one implemented. We also examine potentially massive funding cuts looming on the horizon, with House budget reconciliation proposals potentially slashing the CFPB's funding by approximately 60%, reducing its ability to draw funds from the Federal Reserve.
Tune in now!
Sponsored by Loan Vision
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 Actions On Point podcast, the policy series where we focus on policy issues impacting the credit union mortgage industry. I'm your host, peter Benjamin. Before we get to our episode, just a quick word from our sponsor.
Speaker 3:This episode is being brought to you by Loan Vision. Is your credit union looking to turn your accounting department into a profit driver? Loan Vision can help. Our platform delivers real-time data, loan-level insights and automations to streamline workflows and improve control over financial performance. Transform your cost centers into revenue generators by equipping your team with the tools needed to better serve your members. And don't miss our monthly webinar series, where we share key strategies and best practices to help credit unions optimize their mortgage operations. Register today at wwwloanvisioncom under our upcoming events page.
Speaker 2:Joining us today as our resident expert is Anne-Marie Conboy, Policy Advisor with Brownstein. Anne, how are you doing today?
Speaker 4:I'm good. I'm enjoying some lovely spring weather here in DC and looking forward to the Memorial Day weekend coming up.
Speaker 2:Absolutely Looking forward to it as well. Now I hope you know our policy and lawmakers are also looking forward to it, because, I will say this the Brownstein Weekly Digest you know both. You know the normal, you know here's what's happening in Washington, but also the financial one. I will say this they seem to be getting longer and longer as the weeks go on. I think last week's was particularly long, and so I don't know if that's a good thing or a bad thing, but I think people on the Hill are definitely keeping you guys busy. So call that job security on one hand, but at the same time, I'm sure you need a break from the madness, so let's hope they take a break as well. So let's get back to it. So what is happening in DC? That's really important. I think we have a few things to talk about. You know the CPP being one of the biggest topics. That's front and center, right.
Speaker 4:Yes, the CPP. I think it's definitely a good place for us to start today. The CFPB. I think it's definitely a good place for us to start today. If anyone gets the Brownstein Digest that Peter is referring to, you are probably seeing them headlining a couple stories every week, and they're definitely contributing to the growing length of the newsletters.
Speaker 4:Congress goes out of session and things will be a little calmer around here, at least on the congressional front. It's never guaranteed, but it is. It's a little bit of a light at the end of the tunnel. For us, though, it does not slow down the regulators at all. So you know, even if Congress is out back in the district, the regulators always like to surprise us during a recess week with something, something. But we know that it won't be the confirmation of Jonathan McKernan happening before Congress goes out, because his nomination to be CFPB director was withdrawn by the White House earlier this month. He is instead going to be the Undersecretary of Domestic Policy at the Treasury Department, so that puts him back at square one. For that nomination He'll need to go through another committee hearing and a committee vote before he goes to the floor, and it also leaves us back at square one with a CFPB director. The White House did not.
Speaker 2:So sorry to interrupt. No, no, excuse me, I interrupted you, but I do have a question. So you just said it was the White House withdrawing him. I read one report saying that he withdrew. So it was really the White House, the.
Speaker 4:White House is the procedural mechanism that formally withdraws the nomination from Congress, because the president can say or indicate that he's nominated someone, but until the White House files that nomination with Congress, with the Senate specifically, it can't go anywhere. So, for example, you hear a lot of names floated as or indicated as nominees even before a newly elected president is inaugurated and those people are not official nominees until the president is inaugurated and those names are submitted to the Senate. So I'm sure that Jonathan McKernan had conversations with the White House and had indicated that he would rather serve at Treasury in this role and they came to a mutual decision that the White House would initiate that procedural mechanism to pull him out of the CFPB slot and nominate him instead for the Treasury slot.
Speaker 2:Another question on this this was this just a scenario that it's just taking too long and this is just another path for him to take, or what I mean? What was this? I mean, you know we've talked about this a lot, you know was a surprise pick, something that I think a lot of people were actually looking forward to him being in that spot. But was this just more of a? This is just taking too long. And let's say, it was him that withdrew and then backed by the administration that withdrew and then backed by the administration. Was that his? I know you you can't be inside his head, but I mean what? What was the the, the backing behind this? I mean, I don't, I'm just very intrigued because he seemed like the right fit for the job.
Speaker 4:I think it was probably a confluence of a number of factors that led to the ultimate decision to withdraw him and re-nominate him for the other role.
Speaker 4:You know, I think what we've heard a lot downtown is that it was really difficult to find someone who wanted to be nominated for the CFPB director post. You may recall it took quite a while for them to even name McKernan as the nominee. Back in, you know, december or January we were hearing everyone else floated and it ultimately was McKernan. And then he proceeded through committee in a I would say, pretty reasonable timeframe and then it was a long time where he was waiting for that final vote on the floor. He kind of got bumped in precedence for a number of trade nominees and national security nominees that the White House felt needed to move up that priority list, given everything that was going on with tariffs and I think in the interim it sounded like McKernan, you know, got got close with some folks at Treasury who are who are going in over there and and hearing about the regulatory agenda. It just seemed like it aligned more with what he wanted to be focusing on perhaps than CFPB.
Speaker 2:Okay, thank you for that.
Speaker 4:And given that he hadn't been confirmed yet, it was fairly easy for the White House to just swap someone out.
Speaker 2:Okay, perfect, thank you, all right. What else?
Speaker 4:And given that they haven't named someone in his place yet, russ Vought, the OMB director, will continue to serve in that acting capacity. It doesn't really create any procedural urgency on the administration. The Federal Vacancies Reform Act governs situations like this and Vought can stay in that acting position for another 210 days now that McCurden's nomination has been withdrawn. So it could be next week that the administration picks someone, or they could decide that they're pleased with how Vought is running the bureau right now and decide to focus on other names and come back to this in a little bit.
Speaker 2:And there was no immediate front runner following the McKernan stepping down announcement.
Speaker 4:You know, we've heard that Mark Calabria, who's a Trump 1.0 veteran, has been over there at CFPB and in working with with Vought. But I don't know if he has interest in in pursuing the role full time or if, as a 1.0 alum, he's just over there for a shorter term. So we'll see how that unfolds.
Speaker 2:Interesting. I mean, didn't he at one point say that he wanted the job?
Speaker 4:It's possible. It's possible. I'm not sure if it was a formal statement or anything, or perhaps something attributed to him, just more passing, just in passing, maybe, okay, okay, interesting Again.
Speaker 2:this is all playing out like a soap opera. It really, it really is okay. What, anything, anything else at the cvp? Actually, that's a dumb, dumb question, I'm sorry. There's a lot, a lot of what? A lot of what else?
Speaker 4:I think the better question these days at the cfpb is what else is gone or what else has been erased over there.
Speaker 2:What else is not happening on the CFPB Exactly?
Speaker 4:They're very focused on pulling things back right now. I think a lot of people would agree that during the Biden era the Chopra CFPB there was a lot of material that went out in the form of informal guidance or interpretive rules or blog posts or whatnot, and the CFPB has been working on pulling a lot of that back. Earlier in May they announced the withdrawal of 67 various guidance documents, a lot of them from the Biden-era CFPB, but some of them date back to the Bureau's inception. Okay, there's been a big focus under the current administration on pulling back 10 regulations for every one that they put forward. So everything that they pull back helps open up space for whoever does go in there to move forward with rules that they feel would be better fit for the Bureau.
Speaker 4:A couple of things that the Bureau pulled back that I wanted to mention of the 67. There was a compliance bulletin on ECOA and Reg B that had to do with ensuring there's no discrimination against mortgage applicants who are using Section 8 housing choice vouchers in their applications in their applications. Pulling back a bulletin like that doesn't impact the underlying regulations at all, but it's just a signal that that's something the administration's not interested in looking at as closely going forward. They also pulled back some COVID-era guidance materials related to mortgage servicing and that being an oversight priority for the Bureau. So that came off the books.
Speaker 4:And then, a little bit meatier, from the Chopra era, they pulled back a policy statement about UDAP so unfair, deceptive, abusive acts or practices I'm sure everyone listening to this podcast is familiar with that acronym.
Speaker 4:But it kind of broadened the CFPB's interpretation of the scope of that statute and that was a big point of contention under the Chopra regime. So that's been pulled back, as was an interpretive rule that kind of gave the states more authority in the CFPB's eyes to enforce consumer protection law. And this one the repeal was kind of particularly notable for me because a few weeks prior the CFPB had put out a new memo outlining their enforcement priorities and one of those was that the CFPB was going to try and identify areas where the states have overlapping jurisdiction with the CFPB and leaning on states to move forward with enforcing those statutes, to take some of the burden off of the CFPB. And I think at the time there was some concern because some of the Chopra era guidance that takes a more expansive view of states' powers was still on the CFPB's books. So I think in pulling some of that back the CFPB has better aligned those two visions of the states' role.
Speaker 2:Okay, it's fascinating, Very fascinating. So it's under, we'll say, the current state of the CFPB. Obviously it's going. The current state of the CPB. Obviously it's going to continue to evolve. And I hate to call it a stripped-down CPB. Are you hearing talks of it being stripped down even more, or is this? Are they kind of sort of at that point where they have it to a point where they just want to maintain it where it is and kind of carry it forward until the new director is in place, or is it now kind of a? We're still kind of trying to figure this thing out.
Speaker 4:It seems like the you know, roosevelt and others in senior posts were able to first you know, in January, february reduce the staffing to the levels that they wanted to. February reduced the staffing to the levels that they wanted to, and they are now focused more on drawing down on the CFPB's regulatory library, including both formal and informal pieces of guidance and blog posts and whatnot. So I think on the personnel front it seems like they've kind of checked that box for the most part. I don't know that in the near future we'll see layoffs as significant or a reduction in the size of their staff as significant as we already have. I do think on the regulatory front we're going to continue seeing batches of guidance and interpretive materials pulled back.
Speaker 2:All right. So you know, that kind of leads to the next question, right? So although, yes, udap caused a significant debate within the industry, right, and yes, it had a lot of overlap between fair lending, ecoa, redlining I mean you name it right Truth in lending, I mean there was a lot of overlap that UDAB had right. I mean there was a lot of overlap that UDAB had right. It wasn't a major change like TRID or HMDA or really even ATRQM, right. I would consider those major changes. Or even LOCOP, right, or even LO Comp, right. Are you hinting at or even saying that those are even on the table as potential things that could be changed under this new CFPB or things that they're also looking at, or is it more?
Speaker 4:of a minor rule, minor regulation, or is everything fair game?
Speaker 4:Minor regulation or is everything fair game?
Speaker 4:I think everything is fair game, but it's important to distinguish between rulemakings or pieces of guidance that the aid the Bureau undertook of its own volition and the ones that it was directed to act on by Congress, ones that are rulemakings that are mandated by statute.
Speaker 4:And anything that's mandated by statute often it comes with a deadline for the agency or the Bureau to act. Those deadlines, as we've seen in so many rules, can be blown past or we can have a rule promulgated and then revisited by a new administration, but they always stick around. They always are existing in some form and barring an act of Congress to remove that statute from the books. So those it gets a little more complicated if you are wanting to revise rulemakings directed by statute. If you are revising or revisiting pieces of guidance or rulemakings that were taken because the agency decided that there was a need to take them, it gets a lot easier to find a reason to go back and revisit them. So I think everything's on the table, but the degree of complication in revisiting some of these things can vary significantly.
Speaker 2:Okay, Okay, you know, before we transition. Is there anything else at the CPB before we look at any other important tidbits coming out of DZ?
Speaker 4:Okay, no, I'm sure by the time this airs, something else will have happened.
Speaker 2:Just another surprise.
Speaker 4:I don't have anything else from inside the Bureau for today.
Speaker 2:Okay, all right. So what about the budget?
Speaker 4:So I'll touch first briefly on budget reconciliation. Okay, so, just because the kind of House Financial Services slash Senate banking piece of the budget reconciliation puzzle focuses on the CFPB. The House has already moved on budget reconciliation. They were asked to find about $5 billion in revenue and they did that by capping the ability of the CFPB to draw funds from the Federal Reserve for its operating expenses. The House proposal would drop that allowance from 12% to 5%. So we're looking at ultimately about a 60% reduction in funding for the CFPB annually, should that go forward.
Speaker 4:That piece of the puzzle gets bundled into a much larger and often controversial reconciliation package, the biggest pieces of which significantly overshadow the financial services and the House, which should happen, you know, in the next week or so.
Speaker 4:Likely it will then go to the Senate where there is a something called a birdbath that's given to the bill Bird with a Y instead of an I named for the senator who came up with the concept. But basically it means that in the Senate when you do a budget reconciliation bill, everything in that bill has to have kind of a budgetary nexus and if it's non-budgetary it gets pulled out of the bill. So I've heard from some people who've asked. You know, why isn't Congress using this opportunity to go farther on CFPB reform instead of just lowering the Federal Reserve funding cap? And it really hinges on that the Byrd rule and the pursuant Byrd bath and the Senate will look very closely at whether they can fit anything else into the bill regarding CFPB. But ultimately, if it violates Byrd rule, if it's ruled non-budgetary by the Senate, parliamentarian, that's going to be the final answer on it. But this is probably their best shot at reforming the CFPB's funding mechanism this year.
Speaker 2:Everything ties back to the CFPB.
Speaker 4:It really does. It really does. And then also on budget though not budget reconciliation the actual kind of annual budget for the federal government that call a kind of a skinny budget. The first version of what will become a longer budget from the White House and the version that was released by the White House on May 2nd, as we expected, had some pretty deep cuts to federal funding in it.
Speaker 4:The president's budget is very much a marker. It's a starting point for this process. It's not usually what the final deal looks like. That piece of course is actually crafted by Congress. Congress has the power of the purse. The appropriations process will happen kind of simultaneously in the House and Senate over the next few months, but typically the House is a little bit ahead of the Senate. The president's skinny budget, if you will, suggested a cut for HUD at about 44% of their current annual budget. So it would drop the agency from about $77 billion to $44 billion in funding. So quite a significant cut. But again, that is very much a starting point. Funding the government through the appropriations process. The bills have to be there has to be bipartisan support at the end of the day to get them across the finish line, and a cut like that would certainly not engender bipartisan support. But we'll see over the next few months what the bills from the House and Senate actually look like. And again, this is very much a starting point for negotiations, not a be-all end-all.
Speaker 2:Okay, you know something else that's coming out of the administration. Is you know Trump's one big beautiful bill administration? Is you know you know Trump's one big beautiful bill? I mean, it didn't pass the first time around, I'm guessing you know some Republicans pivoted the last second. Do?
Speaker 4:you see it going through after some revisions. Yeah, so the the one big beautiful bill is the president's name for the budget reconciliation bill.
Speaker 2:Great great.
Speaker 4:It's. You know it's catchy. It is, you know, kind of ironically the acronym is BBB If you look at big beautiful bill, which was also the acronym for former President Biden's reconciliation bill that ultimately, you know, failed and later was re-envisioned as the Inflation Reduction Act. But this is our second BBB in the past few years. But this one, you're right, it has struggled, particularly on the tax piece in recent weeks. It faltered in the House Budget Committee last week, failed a procedural vote there and then ultimately succeeded when the committee was called back into order about 10 o'clock on the 18th Sunday night. The bill is supposed to move through the House Rules Committee this week. I think about Wednesday morning is what they're saying right now.
Speaker 4:The main holdout continues to be a need to strike a deal on the SALT cap, the state and local tax deduction. The SALT was capped under the Tax Cuts and Jobs Act and that has continued to be a controversial policy for particularly House Republicans from states with high household incomes. So those states typically have more Democrats hailing from them. So we're talking about New York, new Jersey, california, so it creates an interesting coalition of bedfellows asking for a deal on the cap. I think a factor weighing on their willingness to strike a deal is that the cap expires at the end of the year. So negotiating for the cap to stay in place at in the House, you know, barring any other major concerns from, you know, the Freedom Caucus, which was looking for deeper cuts, or from moderates who were concerned with some of the cuts to Medicaid, it has really been a difficult task for Republican leadership to get this through the House, just given how tight the margins are and given some of the policies that made it into the bill.
Speaker 4:Yeah, awesome, but then it still goes to the Senate. So stay tuned for you know, changes in the Senate and for this, this process, to repeat in the Senate.
Speaker 2:Okay, before we wrap up, anything else, I think that was you know.
Speaker 4:That was everything on my list, peter, for the day.
Speaker 2:Okay, perfect, well, am, as always, we appreciate everything that you do for our members and, of course, everything that the Brownstein team does for Acumen, our community. Thank you very much for being here.
Speaker 4:Of course. Of course I did have a Washington DC knock-knock joke to close out. I almost forgot DC knock-knock joke to close out.
Speaker 2:I almost forgot, thank goodness.
Speaker 4:Yes, how many congressmen does it take to change a light bulb?
Speaker 2:How many?
Speaker 4:Two One to change it and one to change it back.
Speaker 2:That was good.
Speaker 4:And I should say for propriety's sake, the joke works for senators too. You could insert your preferred chamber.
Speaker 2:Well done, well done. I am All right To quickly close out. Thank you again to Loan Vision for sponsoring today's episode and to all of you. We know your time is valuable. Thank you for tuning in to the latest episode of Acme's On Point podcast. We hope you enjoyed it. Until next time. Be well, my friends.
Speaker 1:Thanks for listening. We'll see you next time at the Acuma On Point Podcast. If not already, be sure to subscribe and give us a five-star rating For more great episodes and information. Be sure to visit us online at acumaorg and to get the latest updates. Head over to our LinkedIn page.
