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With Republican Congress, CFPB may change, GSEs will not

The day after Republicans won control of both chambers of Congress in midterm elections, President Barack Obama vowed publicly that he would work with the new political order to “get stuff done.”

About a day later, Speaker of the House John Boehner was already using strong words to warn Obama not to take unilateral action on a particular issue.

“When you play with matches, you take the risk of burning yourself, and [Obama is] going to burn himself if he continues to go down this path,” Boehner said, referring to executive action on immigration reform.

Such bitterness developing so quickly after the Republican victory calls into question whether Congress and the president will get anything done. Mortgage industry experts, however, say that Republican control could bring some changes.  

The chance of reforming the government-sponsored enterprises (GSEs) is probably a long shot in 2015, but it is not impossible, some say. Republicans might also want to reform of the Consumer Financial Protection Bureau (CFPB), and perhaps make minor amendments to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

GSE reform

The chance of Congress reforming the GSEs is slim to none in 2015.  

“It’s much less likely to have any movement,” Ellie Mae President and Chief Operating Officer Jonathan Corr told Scotsman Guide News. “The question is, what does it do for the economy? It’s kind of in a place where it should be done, but things seem somewhat calm there — there is good movement toward a common securitization platform.”

Over the past few years, there have been at least four proposals to wind down the GSEs, but Congress has taken only one, Johnson-Crapo, seriously. GSE reform, experts say, is not on the public’s mind, and it may not help the politicians who could take it on.  

“The public is not clamoring for it,” said Mortgage Network Inc. Managing Partner Brian Koss. “I think they’re going to leave it just the way it is until the last minute they have to do it.”

Until the end of 2016, Alabama U.S. Sen. Richard Shelby will likely chair the Senate Banking Committee, which has the ability take up GSE reform. Shelby did not vote for Johnson-Crapo when the bill was before the committee, and some think it is unlikely he would use his short time as chairman to tackle such a complex issue.

CFPB changes

U.S. Rep. Jeb Hensarling, R-Texas, has his knives out for the CFPB.

Hensarling recently called the CFPB “the single most unaccountable agency in the history of America.” As chair of the House Financial Services Committee, he is in a position to change that.

The most likely change to the CFPB would be to its leadership structure, and possibly the way it receives funding.

Republicans may try to replace the CFPB director with a five-member board, similar to other government agencies like the Federal Communications Commission. Changing the structure in such a way would make the CFPB susceptible to control by the political parties.

“What [Republicans] really don’t like is that it’s headed by one person who can only be removed for cause,” said one mortgage-finance industry source. “My guess is that you will see some legislative proposals to change CFPB to make it more accountable: making it run by a five-member commission, or having the ability to remove the director for more than just cause.”

The Federal Reserve funds the CFPB, and Congress may try to change that so it can control the agency’s purse strings.

“We’re not trying to return to 2006, we’re just trying not to be in fear of making an error,” Koss said of the CFPB. “What we’re hearing is the rules aren’t that bad, it’s the intonation of how they’re going to be applied that’s making lenders put their overlays on.”


Boehner’s “play with matches” comment was in response to Obama saying he would “take whatever lawful actions that I can take that I believe will improve the functioning of our immigration system.”

Immigration reform is related directly to housing because recent studies have shown immigrants want to own homes, and that they are responsible with mortgages. How the two parties handle the issue could also determine whether they can work together.

National Association of Hispanic Real Estate Professionals Chief of Staff Marisa Calderon said that immigration and housing should be nonpartisan issues. She said the election might have been less about Republicans and Democrats, and more about voters wanting more work to get done in the District of Columbia.

“We don’t view the election as an endorsement of either party, but an expression of dissatisfaction with the status quo,” she said. “Homeownership is a nonpartisan issue. We’re focused on anything that helps increase responsible access to homeownership.”


The upcoming lame duck session of Congress may be like a variation of Groundhog Day — a foreshadowing of how the parties will work together in 2015 and beyond.

If the parties work out a long-term budget compromise, for example, then it may show enough trust is present to get more substantive work done in the future.

If the parties reach a short-term agreement meant to last only until Republicans gain complete control of Congress, however, then it may be time to prepare for a long winter.  

“It’s going to be interesting,” Corr said. “Even though they have control of with majorities in the House and Senate … you can’t just drive things through. There is the veto power in the White House. Really, the question is: Can the parties come together and make good progress without compromising their principles?”


Questions? Contact Neal McNamara at (425) 984-6017 or

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