What can lenders expect from Washington in 2017?
Thought you finally had a grip on the CFPB’s regulatory agenda and major rule reforms? On February 3, President Donald Trump threw uncertainty back into the compliance mix with an executive order directing the Department of the Treasury to examine all of the laws and regulations governing the financial markets, including those set in motion by Dodd-Frank.
What does this mean for lenders still struggling to manage TRID, new fair lending laws, the upcoming HMDA revisions and other regulations?
In the short term, nothing changes. Until laws are changed or rescinded, lenders must continue to follow the regulations put into place by Dodd-Frank and the CFPB over the past few years. But the text of the executive order gives us a vision of what the Trump administration desires for the overall regulatory structure of the financial services industry.
Every Regulation Under Scrutiny
The Executive Order lays out the Trump Administration’s core values for financial regulation:
empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;
prevent taxpayer-funded bailouts;
foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;
enable American companies to be competitive with foreign firms in domestic and foreign markets;
advance American interests in international financial regulatory negotiations and meetings;
make regulation efficient, effective, and appropriately tailored; and
restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.
The Treasury Department has 120 days to conduct a review of all laws regulating the financial services industry and make recommendations on which rules support these principles, as well as which ones inhibit these goals. Based on those recommendations, President Trump could work with Congress to repeal or replace all or parts of Dodd-Frank, revise certain rules, or work with the Agencies to clarify how the existing regulations will be interpreted or enforced.
While the exact details will only be hashed out in the coming months and years, we can make some assumptions on what the administration is seeking based on these principles. The first could be a lighter regulatory burden for all domestic financial institutions.
While it’s unknown what laws might be targeted, Rep. Jeb Hensarling (R-Texas), chair of the House Financial Services Committee, said in a press statement that this order will help to revise the regulatory environment “to end Wall Street bailouts, end ‘too big to fail,’ and end top-down regulations that make it harder for our economy to grow and for hardworking Americans to achieve financial independence.”
Lenders Deserve Clear Directives
No matter what laws are changed, revoked or written, lenders need clarity. One of the biggest sources of stress and excessive costs are when lenders make guesses about the intent or implementation of a rule. These guesses can be costly if the lender makes a good-faith decision that runs counter to an examiners’ interpretation, or the lender may spend extra dollars on compliance activities trying to cover every possible interpretation of a law.
As rules are changed and revised, Docutech’s legal team will be on the front line, helping lenders understand the best ways to implement and comply with the laws and rules.