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Here’s the confusion around independent agencies under Trump's new actions

Does the CFPB need to follow the new orders?

question mark

President Donald Trump recently signed a presidential memorandum and executive order that significantly impact the future of regulations across all industries.

But for housing specifically, there’s a major catch. The two new actions do not apply to independent agencies, which is a clause HousingWire keeps pointing out.

Despite the initiative to pull back on regulation, the biggest housing regulator, the Consumer Financial Protection Bureau, is considered an independent agency.

Other independent agencies include: the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the National Credit Union Administration.

After announcing its executive order to majorly reduce regulation on Monday, the Trump administration later clarified that the new order does not apply to independent regulatory agencies such as the SEC, an article in Reuters stated.

If that is the case, previously hurdles surrounding a final rule on the CFPB’s TILA-RESPA Integrated Disclosures rule and the final mortgage servicing rule implementation date are gone.

The situation, however, is still not that simple. As an article in Politico points out on the “Five big questions about Trump’s executive order on regulation,” details are still lacking.

“What exactly does the White House consider an independent agency? It seems inconceivable that the Trump administration would exempt agencies like the Environmental Protection Agency or CFPB, which are front and center in the ongoing debate over the economic costs imposed by regulatory agencies,” the article stated.

Then, there’s also the outcome that independent agencies will honor the actions in spirit, a move the NCUA choose to do.

An article in Credit Union Times by David Baumann explained how the NCUA choose to handle the situation. This bullet point list describes it best:

  • As an independent regulator, the NCUA is not an executive agency and is not subject to the executive memo.
  • However, the agency decided to comply with the spirit of the memo.
  • On Thursday, Trump appointed board member J. Mark McWatters as acting chairman of the board.
  • Since the NCUA now has a presidentially appointed head, the agency can continue rule-making activities, even as it attempts to comply with the spirit of the memo.
  • Fairbanks said that all pending NCUA rules have been approved unanimously by the two-member board—McWatters and Democrat Rick Metsger.

The National Association of Federally-Insured Credit Unions President and CEO Dan Berger later issued a statement applauding NCUA decision to honor the spirit of Trump’s actions to reduce regulations

“NAFCU and our members applaud the NCUA’s commitment to reducing credit unions’ overwhelming regulatory burden and adhering to the spirit of the Trump Administration’s recent memorandum regarding reducing regulations,” said Berger. “We look forward to continuing to work with Chairman McWatters and Board Member Metsger on these important issues.”

However, there is a key difference between NCUA and the CFPB.

According to the regulatory freeze memorandum, no regulation can be sent to the Office of the Federal Register until a department or agency head appointed or designated by the President reviews and approves the regulation. 

Last week, Trump designated McWatters as the acting chairman of the NCUA Board, meaning it has someone approved by the president that can review rules.

The CFPB on the other hand is still under the leadership of Director Richard Cordray.

For now, the last comment from the CFPB was that it was looking into it. In an interview with The Wall Street Journal, “Cordray declined to answer questions about how a Trump order to freeze new regulations would affect the bureau’s planned rules. He said bureau lawyers are evaluating the directive signed Friday and how it might apply to independent agencies such as the CFPB.”

What is known for sure is that the bureau is still enforcing regulations. Just today, the CFPB ordered Prospect Mortgage, a major mortgage lender, to pay a $3.5 million fine for improper mortgage referrals, in what the regulator calls an alleged "kickback" scheme.

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