Why a Republican CFPB Director Might Not Reduce Reverse Mortgage Regulation

Though the fight over the director’s chair at the Consumer Financial Protection Bureau could drag on indefinitely, reverse mortgage lenders shouldn’t necessarily breathe a sigh of relief if President Trump’s anti-regulation pick wins in the end.

“HUD is going to remain the primary regulator on HECM products,” Krista Cooley, a partner at the Washington, D.C. office of law firm Mayer Brown, told RMD.

Cooley, who works as part of the firm’s Consumer Financial Services group, said the CFPB could retain its focus on Home Equity Conversion Mortgage advertisements and advice for seniors under Mick Mulvaney, Trump’s preferred candidate who also oversees the Office of Management and Budget — but that the Department of Housing and Urban Development will continue to exert more influence over the program than the CFPB.

“They are the primary regulator of the HECM loan product, and it’s governed by their regulations and their implementing guidance,” Cooley said, acknowledging HUD secretary Ben Carson’s public support for the products. “And I don’t think that’s going to change.”

Mulvaney remains entangled in a battle over the line of succession at the CFPB, with multiple prominent Democrats backing deputy director Leanne English. Outgoing CFPB director Richard Cordray appointed English as his deputy shortly before leaving office over the Thanksgiving holiday, and for one chaotic day, both officials claimed to be the rightful acting director. But a federal judge ruled in favor of Trump and Mulvaney last week, giving the keys to the CFPB to the former Republican Congressman and current White House budget director.

Still, Democrats and progressives have vowed to fight Mulvaney’s appointment in court, with Rep. Maxine Waters — along with CFPB legislative architects Chris Dodd and Barney Frank — saying the legal process is far from over.

Mulvaney has already instituted a freeze on hiring, new regulations, and civil penalty payouts at CFPB, but Cooley emphasized that general popularity of the bureau among the public could make it difficult for him to make wholesale changes to its mission.

For instance, financial industry leaders have long called for the elimination of the CFPB’s complaint database, which provides a public listing of consumers’ issues with debt collection, mortgage, and other financial companies. Critics have claimed that the searchable database puts a government imprimatur on uninvestigated claims, while the CFPB frames the resource as a way to hold companies accountable and illuminate problems facing consumers nationwide.

“Their mission is consumer protection,” Cooley said of the CFPB and its database. “The complaint database has challenges, because not all complaints have merit. I think there may be some changes to that database, but I personally would be surprised to see it completely shut down.”

The CFPB could exercise a larger role in reverse mortgage regulation if proprietary products gain a foothold in the marketplace, Cooley noted, as those loans fall outside HUD and the Federal Housing Administration’s authority. But as long as the HECM remains king, she said, HUD will continue to remain in the driver’s seat. 

Cooley’s colleague Andrew Pincus, another Mayer Brown partner who served as assistant to the solicitor general during the Reagan administration, also emphasized that it could be too soon to tell how a Mulvaney-led CFPB will tackle — or ignore — regulatory issues.

“I think he’s been at the job a couple of days. I certainly don’t know what’s going to happen,” Pincus said.

But he also speculated that the public-service nature of the CFPB’s mission makes a large-scale pullback unlikely.

“I think everybody believes consumer protection is important. I think everybody believes it’s critical to root out fraud,” Pincus said. “I’d be surprised if the bureau doesn’t continue to fulfill that role. I think it will.”

Written by Alex Spanko

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