As Trump takes office, are the CFPB's days numbered?

Consumer protection bureau could be in the crosshairs

As Trump takes office, are the CFPB's days numbered?

Donald Trump has taken office in Washington for the second time, vowing to introduce sweeping changes as his presidency begins – and that could include taking an axe to the nation’s consumer protection agency.

Elon Musk, the world’s richest man tasked with helming the Department of Government Efficiency (DOGE) and trimming fat from the federal government, has called for the Consumer Financial Protection Bureau (CFPB) to be scrapped entirely.

That would have big implications for the mortgage industry, which is subject to rules enforced by the CFPB to govern mortgage lending and servicing – but the question of whether scaling back or removing the watchdog entirely would benefit the industry is a topic of hot debate within the sector.

The CFPB was introduced as part of the Dodd-Frank Act of 2010 in a bid to address gaps in consumer protection exposed during the global financial crisis, particularly in the mortgage market.

Brendan McKay (pictured top), chief advocacy officer at the Broker Action Coalition (BAC), told Mortgage Professional America that while the CFPB was viewed as problematic by many within the industry, on the whole it served an important purpose.

“It will never surprise me that those within the mortgage industry, especially loan officers, have very negative opinions towards the CFPB – because the CFPB from their perspective makes their job more difficult and they have to do things that they feel don’t make sense sometimes,” he said.

“And I understand that – but I also understand what our industry looked like when we were left to regulate ourselves and it led to not just a housing crash, but a global economic crash. Those are the types of stakes that we’re talking about.”

He credited the CFPB with revitalizing the mortgage industry and helping spur its slow revival from the ashes of the 2008 meltdown – and said it continues to play a crucial role despite various flaws.

“They have provided a stabilizing hand that has brought our industry back to being the most stable mortgage market in the world,” he said. “And I think they’re a big part of that, and I think that something that has a place should never be deleted.”

Would DOGE be missing the mark by targeting the CFPB?

What’s more, while most federal agencies are funded through the annual congressional appropriations process, the CFPB operates as an independent agency within the Federal Reserve System, with its funding coming primarily from Fed earnings rather than taxpayer dollars.

With that in mind, it likely makes little sense for Musk’s new department to target the entity as part of its wider cull, according to McKay.

“If anything, they’re the most profitable federal agency if you look at the amount of money in the last six months that they’ve given back to consumers after successfully uncovering different illegal financial operations by organizations,” he said.

“They run a positive budget and that’s not even factoring in the fact that they don’t get their money from taxpayers but they do give money back to taxpayers. So it’s a pretty good deal for the American public.”

How could the CFPB improve its outreach to the mortgage industry?

Areas for improvement when it comes to the CFPB’s interactions with the industry, McKay said, include the clarity of its guidance. “I still think sometimes there’s a sentiment among the industry that they don’t know exactly where the line is until it’s enforced,” he said. “And I’d love to see more FAQs responding to specific questions that are posted publicly.”

He also said the CFPB’s APR calculation is “broken” and hindered by problems, although it’s proven receptive to having a conversation about changing that.

“When you’re comparing quotes from direct lenders and banks to mortgage brokers, on many transactions our compensation is counted towards the APR but lender credits that might exist are not,” he said, “and it can result in a mortgage broker offering a quote to a consumer that has a lower interest rate and lower lender fees but a higher APR than a quote from a direct lender or a bank – and that’s a major problem.”

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