What we all knew would happen has finally happened — the director of the Consumer Financial Protection Bureau, Richard Cordray, has stepped down and has been replaced with a person more aligned with the current administration. It’s what always happens when there’s a change of power. But Cordray’s replacement is just one of several new voices on Capitol Hill that are about to reshape housing policy as we know it.
The appointment of Mick Mulvaney as CFPB director may not be permanent. But during his time as a congressman for South Carolina, Mulvaney made it clear that he wanted to eliminate the CFPB. At the very least, he is likely to take a serious look at the CFPB’s budget. As director of the Office of Management and Budget, Mulvaney is known to take a hard line on budget issues. Almost certainly, enforcement will be de-emphasized at the CFPB while certain agency departments, such as Consumer Education and Engagement, Office of Equal Opportunity & Fairness and External and Community Affairs may be targets for elimination or substantial reductions.
Mulvaney has also supported eliminating the CFPB director’s position, rather running the agency by committee. Working from within the agency may prove useful in this effort. More critical to the CFPB’s future would be changing how the agency is funded. Currently, the CFPB is a branch of the U.S. Treasury, and any modification in its funding would require congressional approval. Such a change is more likely with the support of Treasury Secretary Steve Mnuchin, who is aligned with Mulvaney on the agency’s future.
As the interim director of the CFPB, Mulvaney will also be a member of the Financial Stability Oversight Council, which will also play a role in reshaping our housing rules. The FSOC includes several newly installed financial services executives who are friendly with banks and Wall Street, among them Comptroller of Currency and former OneWest Bank executive Joseph Otting and SEC Chairman and former Wall Street man Jay Clayton.
There are still other congressional changes that could fuel a roll-back of regulations. Several housing policy leaders such as Sen. Bob Corker, R-Ky., and Rep. Jeb Hensarling, R-Texas, are resigning their seats, which opens the door for new leaders to take their place.
Hensarling is the representative behind The Financial CHOICE Act, which, if passed, would rein in Dodd-Frank and convert the CFPB to a commission with a director appointed by the president. More importantly, Hensarling chairs the House Financial Services Committee, which oversees the entire financial services industry, including securities, insurance, banking and housing. The committee’s current agenda ranks Dodd-Frank and Federal Reserve reform as its top priorities.
Of the other committee members, Reps Bill Huizenga, R-Mich., and Sean Duffy, R-Wisc., are the two most likely to replace Hensarling. Huizenga is a former real estate agent who worked on The Mortgage Choice Act of 2013, a bill which would have changed qualified mortgage rules. He is currently in charge of one of the Financial Services sub-committees on ‘Capital Markets, Securities and Investments’ and has risen through the ranks as a substantial voice on the industry. Duffy, a former district attorney and reality TV personality, is one of the GOP’s rising stars who currently chairs the Housing and Insurance sub-committee.
While shakeup at the CFPB is commanding everyone’s attention, it’s only the beginning of a massive shift in power that will have far-reaching repercussions for the mortgage industry. The full impact of these changes remains to be seen, and one thing is certain: they will be interesting to watch.
