It has been a challenging time to cover the mortgage industry in recent weeks – especially in print – due to the potential for rapid regulatory rollback. As we were putting this issue to bed, it was announced that President Donald Trump had signed an executive order directing the Treasury secretary to consult with regulators about what needs to be done to reform the Dodd-Frank Wall Street Reform and Consumer Protection Act – an order that, in all likelihood, will lead to a significant watering-down of the law, possibly even a repeal. Apparently, Trump is going to do whatever he can, administratively, to roll back Dodd-Frank without necessarily having to run the changes through Congress.
The big question for mortgage servicers, of course, is whether the Trump administration will seek to dismantle the Consumer Financial Protection Bureau (CFPB), which was born out of Dodd-Frank and has enacted a set of regulations that have made the servicing of delinquent and defaulted loans much more expensive.
A senior White House official, speaking with anonymity, told the press in the first week of February that “some of the rules [enacted under Dodd-Frank] may have even been unconstitutional, creating new agencies that don’t actually protect consumers” – an obvious reference to the CFPB and its single-leadership structure. However, some people close to the situation have said that it is more likely that the administration will keep the CFPB more or less intact but that there could be congressional oversight of its budget and spending. As of right now, whether the CFPB survives remains to be seen.
The other big question – which also was not known as of press time – is whether Trump will seek to fire CFPB Director Richard Cordray, which the president can do at any time. A bill has been introduced in the Senate that would change the bureau’s leadership structure to that of a committee instead of a single director. That bill is essentially in reaction to the U.S. Court of Appeals for the District of Columbia Circuit’s recent decision in the CFPB-PHH case, in which the court concurred that the bureau’s leadership structure is “unconstitutional” and needs to be changed to a committee structure.
Meanwhile, until something actually happens, all servicers can do is continue to abide by the rules that the CFPB put into place in January 2014 – and that have been significantly clarified in the final rule released this past summer.
What I find interesting is the fact that not everyone in mortgage servicing is necessarily in support of regulatory rollback, particularly as it might apply to the CFPB and its mortgage servicing rules. Sure, there are certain aspects of the mortgage servicing rules that may be too onerous – but at the same time, the industry has developed, at least to a degree, an “appreciation” for what these rules have accomplished. The reason, in my opinion, is simple: The rules clarify and codify the regulatory framework under which servicers operate, and the industry is appreciative of the fact that it was able to play a strong hand in the development of these new “rules of the road.” Larger servicers – in particular, those that have invested considerable time and money in new processes and systems – have come to embrace the new rules as a “competitive differentiator.” Some servicing execs have even said that they would be reluctant to abandon what has been put in place, simply because it has resulted in new operational efficiencies, especially in the area of performing loans, and much improved customer service.
As of this writing, it would appear that the servicing industry is content to forge ahead with the regulatory framework that is currently in place. That means Servicing Management must forge ahead under this same assumption, as well. Will features such as the one on page 26 regarding the final mortgage servicing rule – or the one on page 14 regarding servicing rights transfers – become moot as a result of regulatory rollback? As of right now, anything is possible, but most agree that what should not – and perhaps cannot – be dismantled are the lessons learned during the worst housing meltdown in the history of the U.S.