President Donald Trump has made eliminating regulations a top priority of his administration and has tried to limit the reach of one of the chief mortgage regulators — the Consumer Financial Protection Bureau. But lenders who interpret that to mean they can relax their compliance efforts are sadly mistaken, according to several panels of experts at the Ellie Mae Encompass conference in Las Vegas.
“As is true with everything in Washington right now, there is a certain degree of chaos at the bureau at the moment,” said Jack Konyk, executive director of government affairs for Weiner, Brodsky, Kider. “It’s a period of uncertainty, but it’s not a good time to relax or take risky measures.”
It's easy to understand why financial companies expect some regulatory relief in the current climate. Richard Cordray, the industry's arch-nemesis, is gone from the bureau and his replacement, acting director Mick Mulvaney, who is also in charge of the Office of Management and Budget, has taken quick action to change the bureau.
But Konyk pointed out that Mulvaney is not dismantling the bureau, as some claim, but only scaling back its regulatory authority to match what is spelled out clearly in the Dodd-Frank Wall Street Reform Act — which is still plenty to comply with.
In a January memo outlining a new vision for the bureau, Mulvaney wrote:
When it comes to enforcement, we will be focusing on quantifiable and unavoidable harm to the consumer. If we find that it exists, you can count on us to vigorously pursue the appropriate remedies. If it doesn’t, we won’t go looking for excuses to bring lawsuits.
While many in the financial industry (and the media), focused on Mulvaney’s call to end regulation by enforcement in that memo, Konyk is more concerned with the middle part of that quote, where Mulvaney vows to “vigorously pursue” those who harm consumers.
Konyk also sees a growing threat from the states.
“Enforcement is not going away, and as the federal agencies create a vacuum, the states will be more active,” Konyk said, citing a recent statement by NYDFS Superintendent Maria Vullo, who pledged to “fill the void" left by federal regulators.
“The states are looking harder at financial companies now. They think it’s their role to save the country from you crooks in the industry — that’s how they see it,” Kronyk said. “In some ways, it’s even riskier now.”
Konyk was not alone in his threat assessment.
At another conference session, Jerra Ryan, senior vice president of compliance at First Choice Loan Services, cautioned that lenders need to think long-term when it comes to compliance. If a Democrat wins the White House, any loosening of regulations would be quickly reversed, Ryan noted.
“If Elizabeth Warren gets in, she will rebuild the CFPB — not that it is gutted now,” Ryan said.
Indeed, a Warren presidency would undoubtedly usher in a new age of regulation. The Massachusetts senator, who helped create the CFPB, regularly challenges Mulvaney and his vision for the bureau.
In addition, it's easy for lenders to get a little lazy about TRID guidelines in particular because they haven't been judged on that set of rules yet.
“There have been no CFPB audits on TRID yet — the regulators are just now starting that, because they are two-year backward looking audits,” Ryan said. “So two years from now, when there might be someone different in charge, they will be looking at what we are doing right now.”
