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Well if you haven’t heard yet, the CFPB has been deemed unconstitutional. There are news outlets reporting this everywhere right now. For the sake of this article I’ll be referencing an article by National Mortgage News titled: “After ruling, stage set for new battles over CFPB’s future.”


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Here’s a quote from the article:

“In the 5-4 decision Monday written by Chief Justice John Roberts, the court found that the agency’s structure vests too much power in the hands of one person. Roberts wrote that the president can remove the single director of the CFPB for any reason, striking the so-called “for cause” provision from the Dodd-Frank Act.”

Not too much changes immediately. The CFPB stays in place and any past rulings or enforcement actions still stand. Even though they will stand, the CFPB will more than likely get sued by various attorney’s that represent financial institutions that had to pay fines to the CFPB in the past. They’ll claim that since the agency is unconstitutional, they didn’t have the authority to impose the rulings and associated fines that were imposed on their clients. That should be interesting.

This also means that if there is an administration change with the election, the current CFPB Director, Kathy Kraninger, can be ousted in favor of another Director that is better aligned with the Democratic party. Normally when it comes to politics, Republicans are viewed as conservatives and Democrats as liberals. Not when it comes to the CFPB. With respect to the agency, Republicans tend to have a more liberal approach to regulating and Democrats are more conservative.

So what do current Director Kraninger and past Director Richard Cordray think of the decision?

Here’s a quote from the article:

“Today’s Supreme Court decision finally brings certainty to the operations of the bureau,” Director Kathy Kraninger wrote on Twitter. “We will continue with our important mission of protecting consumers with no question that we are fully accountable to the president. Consumers and market participants should understand the same rules continue to govern the consumer financial marketplace.”

Former CFPB Director Richard Cordray agreed, saying the decision clarifies the leadership issue while making clear that the bureau can continue to exist.

“In some ways it’s a green light to move ahead,” Cordray said. “Roberts was pretty clear that the only effect is to sever the ‘for cause’ provision.”

This will however cause Congress to look into completely changing the structure of the CFPB.

“We still believe that Congress has an opportunity to strengthen the CFPB over the long term by converting the Bureau into a five-member, bipartisan commission,” said Rob Nichols, president and CEO of the American Bankers Association.”

And finally, many feel that the courts decision will move the cross-hairs to the single Director setup at the FHFA. From the article, here’s what Mark Calabria had to say:

“I respect the Supreme Court’s decision in the Seila Law case,” he said. “This ruling does not directly affect the constitutionality of FHFA, including the for-cause removal provision.”

So we’ll have to see how this all plays out. The most important thing is to stay focused on the task at hand, which is to server our customers as best we can given our current market conditions. This is a big deal, I’m not downplaying it, and we’ll keep you posted on any notable developments in the future.

My question to you is this: How do you think this decision will impact the mortgage and real estate industry?

Let us know in the comments down below. Have a great day!

~ Frank

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