House and Senate Republicans will continue their campaign to restructure the Consumer Financial Protection Bureau next year, according to K&L Gates attorneys and policy experts.
And depending on how certain mortgage rules are written, Democrats and consumer groups might support a Dodd-Frank Act corrections bill. The landmark legislation passed in 2010 created the CFPB and mandated the issuance of mortgage rules to prevent risky lending practices.
K&L Gates partner Dan Crowley told reporters mid-week that Republicans want the CFPB to be supervised by a five-member commission instead of a single director.
“In the Senate, Republicans are going to hold up confirmations for other agencies until they are able to drive changes in the CFPB,” Crowley said. That could affect appointments to the Securities and Exchange Commission and the Treasury Department.
In the House, the new chairman of the Financial Services Committee, Rep. Jeb Hensarling, R-Texas, also wants to fix CFPB and give Congress control over the bureau’s budget. “Revisiting the structure of the CFPB is one of Hensarling’s top priorities,” Crowley said. (Currently, the CFPB is independently funded by the Federal Reserve Board.)
At the same time, mortgage industry and consumer groups are concerned that the CFPB might finalize a “narrow” Qualified Mortgage rule that could lead to tighter credit standards and put homeownership out of the reach of low- and moderate-income families.
K&L Gates partner Larry Platt said he believes that CFPB officials are still divided over the qualified mortgage rule, which will set the underwriting standards lenders must use to determine a borrower’s ability to repay the loan. QM loans will be shielded from litigation, other loans will not.
“Within the bureau, there is a battle going on between those who think they should fulfill the original statutory language” of the DFA, which would constrict mortgage credit, said Platt. He added that some bureau officials want a broader QM rule because credit standards in the marketplace are already too tight.
The CFPB is expected to issue the QM final rule later this month or early January.
Meanwhile, the U.S. courts are reviewing several lawsuits involving recess appointments made by President Obama, including one case challenging the recess appointment of Richard Cordray to be the first CFPB director.
K&L Gates policy expert Bruce Heiman expects the Supreme Court will review one of these recess appointment cases and issue an opinion. It is one of those issues “that they just love getting into,” Heiman said.