In a latest episode of “The Mortgage Officer Podcast,” co-hosts Dustin Owen and John Coleman dive into the potential impacts of Elon Musk’s thought to disband the Client Finance Safety Bureau (CFPB).
This dialog has been edited for size and readability. To begin the episode, Coleman asks Owen to share his views on Musk’s plan to remove the CFPB.
Coleman: Dustin, do you assume Elon Musk will shut down the CFPB in his new function within the authorities?
Owen: No. We all know that there’s a brand new sheriff on the town. One of many initiatives of the Trump administration is to create the Division of Authorities Effectivity (DOGE). Musk is saying out loud that the very first thing he’s going to do is he’s going to close down the CFPB. That impacts the mortgage business and shoppers within the business.
CFPB additionally regulates payday loans, bank cards and debt servicing. So, in all probability scholar loans and for-profit schooling could be put into that.
Subsequent, Owen explores why the U.S. authorities initially fashioned the CFPB.
Owen: In 2008, the monetary collapse occurred primarily because of a housing bubble burst stemming from unregulated mortgage originators and Wall Road banks that had been too large to fail due to lackadaisical guardrails. The CFPB got here out of the Dodd-Frank Act. The concept for the Dodd-Frank Act got here from a Harvard Legislation professor named Elizabeth Warren. The Dodd-Frank Act got here into regulation in July 2010, and by July 2011, we had the CFPB.
Why do we want the CFPB? Wall Road stated, ‘Hey, we love extra of the mortgage business.’ Lenders had been like, ‘Effectively, we will’t provide you with extra as a result of there’s not that many individuals who qualify for extra.’ They usually stated, ‘Effectively, let’s loosen up the {qualifications}. Let’s create various financing choices.’
Wall Road needed extra. I must create extra mortgages so I can create extra collateralized debt obligations. I can then promote them to traders abroad. I can then promote them to life insurance coverage firms after which promote them to pension funds. And that’s how the bubble was created.
Owen and Coleman transition the dialog to discover why the CFPB mustn’t go away.
Owen: The CFPB prevented debtors from being taken benefit of. Pareto’s precept applies: 80% do good and play by the foundations. It’s the 20% — the unhealthy apples — that ruined the bunch. We’ve got to guard the 20%. I don’t wish to see the CFPB go away as a result of I believe it does extra good than it does hurt.
Owen additionally explains that the bigger points with the CFPB lies in the way it enforces guidelines as a substitute of creating clear boundaries for mortgage brokers and bankers to comply with. He additionally dives into potential penalties of eradicating the company’s oversight of mortgage firms.
Owen: The business thinks it’s in our greatest curiosity to maintain the CFPB as a result of it will be pricey to unwind every part we’ve constructed and created over the previous 13 years. However to really cast off it will truly be punitive for the mortgage business.
To finish the dialog, Coleman and Owen allude to why Musk and his constituents wish to disband the company.
Owen: Look, if you’re the wealthy folks in energy —
Coleman: I wish to keep that approach. So, strip away all of the handicaps and guardrails that permit those who aren’t like me to catch up. I don’t need an excellent honest race, Dustin.
Owen: Truth.