7 Ways Trump Can Improve the CFPB in 2019 and Help the Housing Market

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As the Consumer Financial Protection Bureau or CFPB continues to change and evolve, there are ways that Trump and other individuals may be able to improve it so that it better serves the American people.

trump cfpbA recent report from the Office of Inspector General for the Consumer Financial Protection Bureau has determined some areas of improvement. In particular, the CFPB’s Examiner Commissioning Program (ECP) and the agency’s On the Job Training (OJT) Program could use some work. In the evaluation, the OIG looked at the design, implementation and execution of both programs. The OIG determined that the effectiveness of each program in the Consumer Finance Protection Bureau could be improved.

The CFPB first implemented the ECP at the end of 2014 and described the program as important for its effective supervision program and the professional development of CFPB examiners. The OIG found that the CFPB had taken several steps to enhance the ECP, there were still several shortcomings:

  • Because of workforce needs and advancement incentives of management, some examiners seemed to proceed through various components of ECP before they were completely prepared. Also, certain controls that were established by the CFPB to manage progression of examiners through ECP could be ineffective.
  • Some examiners did not seem to get enough training and developmental chances or exposure to important CFPB internal processes before they were allowed to proceed to some parts of the ECP.
  • The CFPB lacked a formal training method to evaluate and update the ECP.
  • The CFPB was not effective in consistently communicating ECP requirements to prospective employees, including the starting point for a five year requirement to complete the ECP.

The OJT program at the Consumer Finance Protection Bureau is supposed to be a standardized program that ensures that examiners are properly trained across all regions. In the program, the trainer for the OJT is supposed to work with the examiner on an exam, offer mentoring, and discussion the Supervision and Examination Manual. He also is supposed to oversee the completion of assigned modules by the examiner. The OIG noted that CFPB regions have not consistently implemented the OJT program. Examiners may not have fully understood the requirements, expectations and purpose of OJT.

The report also found that the divisions idea was to give examination employees in each region access to all exam paperwork documentation as well as supporting materials in the system of record on a current shared drive for exams done in that region.

But open access in each region meant that certain division employees had access to materials with super visionary information that was confidential, and personally identifiable information when they did not seem to have a business need to have that information.

The OIG further found there were file size limitations in the system of record that caused examiners to store work documents at several locations.

The report makes several recommendations to address findings of OJT, and ways to boost the effectiveness of the OJT and ECP programs. In a response to the OIG draft report, the CFPB stated that it agrees with the recommendations and outlined plans to implement them.

Other Ways CFPB Can Be Improved

cfpbThere are some other ways that Trump’s administration can improve the CFPB and the related financial system in 2019:

  • Boost the threshold: Experts in finance say that the threshold for banks that are subject to Dodd Frank’s higher prudential requirements should be raised from $50 billion to at least $200 billion. Instead of involving 40 banks, it only should affect the biggest dozen or so banks. Failure beyond the biggest banks, while would be costly and painful, can probably be contained.
  • Change the Volcker Rule: The rules states that any short-term trading is improper unless the bank can show it is one of very limited and specific exceptions. The presumption should be turned around. The rule should allow all trading unless it is clearly speculative in nature. Banks should not have to spend millions of dollars every year trying to comply with this rule. Regulators also should not spend precious resources on enforcing Volcker.
  • Repair mortgage system: It is time to allow mortgage bankers, Fannie Mae and Freddie Mac to retain cash and do recapitalization of their balance sheets. Fannie’s Homepath loan continues to help first time house buyers across the country. Congress should end the cash sweep that happens at the end of every quarter when dividends are paid by Fannie and Freddie to the US government.
  • CFPB should be de-politicized. It should be a commission that is subject to presidential appointment with the Senate consenting.

References: https://www.sidley.com/-/media/publications/national-law-journal_5-key-fixes-that-will-improve-doddfrank.pdf and https://www.consumerfinancemonitor.com/2017/10/02/oig-report-finds-effectiveness-of-cfpbs-examiner-commissioning-and-training-programs-could-be-improved/


About Tom Murphy

Tom Murphy grew up in La Jolla, California surfing and carving his niche in the local real estate market. Mr Murphy has a stellar record as a loan officer with over a decade of experience helping people secure the right home loan. He now works at Movement Mortgage in Carlsbad CA.