Welcome to the Latest Episode of “What Fresh Hell Is This?”
The government shutdown is finally over (for now), the CFPB might be out of business by Jan 1 (yes, really), and someone at the FHFA thought 50-year mortgages were a good idea.
If you’re feeling whiplash, you’re not alone.
Credit union attorney Henry Meier recently sat down with Sarah Snell Cooke, co-founder/host/queen of The Credit Union Connection to break it down for credit unions.
The Government Shutdown: Credit Unions to the Rescue (Again)
The historically long government shutdown finally ended, and while the NCUA never had to close its doors (thanks to credit unions funding the agency), the ripple effects were real. Federal workers, contractors and the small businesses that depend on them all felt the pain.
And who stepped up? Credit unions, naturally. Because when the government fails people, credit unions show up with short-term loans, financial counseling and actual solutions.
It’s basically the credit union version of “Fine, I’ll do it myself.”
Now that the budget battle is behind us, Meier expects to see more regulatory action from agencies like the NCUA. With the funding fight over, they can focus on proposing new regulations. Whether that’s good news or just “more work” depends on your perspective.
The CFPB Funding Crisis: A Bureaucratic Thriller
Hold onto your hats, because this CFPB situation is wild.
The CFPB is funded through the combined earnings of the Federal Reserve System. Quarterly, they can draw up to a certain cap from the Fed to cover expenses. Simple enough, right?
Wrong.
On Nov. 7, the CFPB filed a notice with a court stating that, based on their interpretation of the law, they’ll be out of funding on Jan. 1. Why? Because they believe they’re only entitled to funding when the Federal Reserve is running a profit. Henry dropped a truth bomb here—the Fed has been losing money since 2022. Who knew?
The hitch is that “earnings” means “profit,” and no profit means no funding. Therefore, the CFPB needs congressional appropriation to keep operating.
Let that sink in.
This interpretation has never been tested in court. It’s brand new legal territory, Henry shared, and the Trump administration is basically saying, “Cool, then you’re shut down on January 1.” Unlike air traffic controllers, who were forced to work during the shutdown, the CFPB wouldn’t be covered by emergency provisions.
So What Happens Next?
There are a few possibilities, all of them cray-cray:
Scenario 1: Come Jan. 1, the Trump administration shuts down the CFPB. Someone immediately sues for an injunction. It will be battled out in court while the CFPB sits in limbo for months. Given how much deference the Supreme Court has shown to the Trump administration, this could drag on for a while.
Scenario 2: Congress steps up and funds the CFPB. (Meier said this with a chuckle, and honestly, same. The chances of a Republican-controlled Congress and the Trump Administration funding the CFPB are approximately zero.)
Scenario 3: Courts eventually rule on the merits and decide the CFPB’s interpretation is correct, meaning the bureau would need either congressional appropriation or excess Fed earnings to operate.
What Does This Mean for Credit Unions?
If the CFPB goes dark, we’re in uncharted territory. The CFPB calculates the APR used for mortgage regulations. It recently proposed regulations on small business lending and open banking. What happens to those?
And most importantly: What’s the status of existing laws and regulations that the CFPB is supposed to enforce alongside state attorneys general?
Nobody knows. Just the kind of regulatory certainty credit unions love. 😏
The 50-Year Mortgage: A Weekend Adventure in Bad Ideas
Remember when the head of the FHFA pitched the idea of 50-year mortgages to President Trump over the weekend? Trump initially tweeted support, however, by Monday, the White House shot it down faster than a Thanksgiving turkey.
The argument for 50-year mortgages is simple: longer terms mean lower monthly payments, which could help with housing affordability. The problem? Borrowers would pay exponentially more interest over the life of the loan.
Here’s what’s odd: Credit unions and banks are already authorized to offer mortgages up to 40 years. The NCUA can even approve longer mortgages on a case-by-case basis. So we’re already doing 40-year mortgages (though not commonly), and suddenly everyone agrees 50 years is a bridge too far.
Meier’s take: If 40 years seems too long—and it does—why is that okay but 50 isn’t? It’s an interesting question that nobody seems interested in answering.
What credit unions should do instead?
Housing affordability is one of the few issues everyone agrees is a problem. But floating gimmicky mortgage terms isn’t the solution.
Henry suggests credit unions look at their business models and ask: Why aren’t we doing more home equity lines of credit? You have tons of people locked into low-rate mortgages who aren’t selling because they don’t want higher rates. Those people could pull equity from their nearly-paid-off homes if given the opportunity.
Also, this might be the perfect time for credit unions to develop programs targeting first-time homebuyers. Show them you understand their pain and you’re willing to help. It’s good business and good mission work.
Credit unions are federal instrumentalities, which makes them the perfect blend of public-private solutions to the housing crisis. Not everything needs to be a government program, and credit unions are uniquely positioned to help.
Compliance still matters
Even as the NCUA and CFPB slow down enforcement, those laws are still on the books. Someone will enforce them—if not at the federal level, then at the state level. So while there’s less day-to-day compliance pressure, don’t get complacent and assume your obligations have disappeared.
Because they haven’t.
The regulatory landscape is chaotic right now, and credit unions have always been good at navigating economic uncertainty to continue serving their members. Just keep your ears and eyes open, stay compliant and maybe start thinking about those HELOC and first-time homebuyer programs.
The transcript below is true, and the names have not been changed to protect the innocent. However, it is AI generated so cut it some slack.
Sarah Cooke
Hello. Welcome everybody. I’m here today with Henry Meyer. Welcome.
Henry Meier
Thank you very much for having me.
Sarah Cooke
Yeah, welcome everybody to the credit connection, and Henry of the law firm, Henry Meyer, will be discussing, we’re going to talk about so many different things, with the government shut down, and the CFPB, and maybe the 50 year mortgage, if you’re lucky. So let’s get started. Tell us a little bit about the opening up of the government again after the very, very historic, long, historically long shutdown. What that means for credit unions.
Henry Meier
Think it’s great news. And the interesting thing about credit unions, because of the way we’re funded, the NCUA never, never had to close down. But I still think we’re going to see a couple of things that are great. You’re going to see the funding back up for the city, for the city of ice. You get you going to see and you might you, so that’s going to be extremely helpful. And then, because the they’re done with the budget fight, you might see the agency more focused on some of the regulations that they might want to propose. So bottom line is, I expect more, more happening now that the budget, the budget battle is behind us,
Sarah Cooke
yeah, yeah, for sure. And thank goodness. I mean, credit unions obviously stepped up, but that was awful for so many people. Yeah, that worked for the government. Work for contractors related to the government.
Henry Meier
It’s always good to see how many credit unions coped out people who are affected. A lot of a lot of credit unions offered short term loans, people in government, financial assistance to people who who were affected by it. And that’s always good to see. It’s always good to see the industry stepping up.
Sarah Cooke
We’re also looking at the CFPB right now because they are not affected by this. Now, signed continuing resolution. What’s going on? There? Very
Henry Meier
interesting. Winkle on what’s going on with the CFPB, as you noted, because the way they’re funded, they went on subject to a government shutdown completely, either, although some employees will apparently weighed off as a result of the government shutdown. Now, on November 7, we had a new twist to the drama that is the battle of the Trump administration to basically do away with the CFPB. The CFPB through a motion to a court, with the courts hearing an appeal from from from government employers who are saying that they’re being shut down illegally. Well, the CFPB, through the court, filed a notice that, from its interpretation of the law, the CFPB will be out of funding on January 1, and that money that they need to operate can only be appropriated through Congress. This really created some scratched heads, and could be a hugely significant development if, in fact, now here’s why, though, first of all, the basics under the under 5497, of the of the US Code. The CFPB is funded through the combined earnings of the Federal Reserve System. Okay? And then we all know that on a quarterly or test or yearly basis, the CFPB can get up to up to a certain cap. It’s cap, but can get up to a certain amount of money from the from the Federal Reserve System to for its expenses. Now, the CFPB is taking the position that as a matter of statutory interpretation, it is only entitled to that funding when the Federal Reserve system is running a profit. Okay? Their argument is that earnings mean profit. Therefore, who knew why? Didn’t know this until a couple of days ago. The Federal Reserve has actually been losing money, or at least on making it making a profit, since 2022 come January 1, they’re going to say there’s no funding for the CFPB and under and it’s not subject to an Emergency, emergency situation where, like the the air traffic controllers were made to work even though they weren’t getting paid. CFPB is not covered by that. So the government is making it quite clear that, given its position for intensive purposes, the CFPB will be out of business January 1. Now they point out that this doesn’t have to be the case under their interpretation of the statute. Congress has been put on notice of this issue, and if they want to, they can put forward an appropriation to fund a. The CFPB so let’s break this down even further. Um, let’s this argument was first advanced in a few lawsuits last year, but it wasn’t addressed. So now we’re standing the fact that this issue has never been analyzed by the court or considered by any court, the CFPB, through an opinion of the Justice Department, is now saying that, based on our interpretation, the CFPB effectively needs congressional funding when the Federal Reserve is at a loss or has generated a loss for for the year. Now that’s that may not be true, that’s that needs to be seen, but we have to have litigation over that issue. We’ll know that the Supreme Court has signaled to the lower courts that they want the administration to be given a tremendous amount of deference when it seeks injunctions that allow it to continue with what it feels is proper interpretation of law. So it’s quite possible that what you’re going to see here is January 1 comes. The Trump administration says there’s no more funding. They shut down. There’s a court case immediately once I seeks an injunction against the CFPB for not getting money from the from the treasury, at which point you would have an argument as to whether or not an injunction should be imposed against the against the Trump administration, and then that that would be appealed almost immediately. Ultimately, you have to allow for the possibility that, given the difference that they have shown to the Trump administration, you could have several months before this issue was resolved. So then that would be amazing in itself, so that you would have several months of the CFPB effectively not not functioning. Now another possibility, and I say this almost with a chuckle, is that Congress will will step up and fund the CFPB. That was gonna be my next question. I Theoretically that’s that’s possible. Who thinks that the that funding of the COPD will get through a Republican controlled Congress and not be vetoed by President Trump in an election. So really, what we’re looking at is a situation where the COPD continues along its position. This is going to end up in the courts, and we might end up with a sustained period, at the very least until the legal issue gets resolved. Now there’s another possibility as well, which is that once the court or the courts hear the case on the merits, they decide that, you know, the CFPB is right as a matter of statutory interpretation. And if that was to happen, you could have a situation where, going forward, the only way you’re going to get funding for the CPB is either through an appropriation or from excess earnings of the Federal Reserve System. The implications of this could be huge. For instance, what we would be in Uncharted, unreal territory the CPB is a lot that people don’t even think about the there’s something called the APR, which is the rate used to determine certain mortgage, mortgage trip wise, for regulation purposes. Okay? CFPB is the entity that calculates that. Okay? And a lot of people use that for a lot of different reasons. They were the CFPB recently introduced two regulations, one dealing with the small business lending wall, and the other, the other dealing with open open banking. Well, with the open banking proposal, what happens to those regulations? Do they just do those proposals? Do they just sit there or in what’s the end, finally, and most importantly, what is the status of the existing laws and regulations, since the CFPB is given the statutory responsibility of enforcing the federal regulations in conjunction with the Attorney Generals.
Sarah Cooke
And I mean, from what I understand Trump, the Trump administration, and President Trump specifically, they’re not big fans of open banking. That would Is that correct? Is that your understanding? So they probably veto that,
Henry Meier
stop it. That’s a that’s a proposed regulation. And I think they basically can see in court that under the Dodd Frank Act, there does have to be an open banking regulation. What they argue, though, is that the CFPB initial regulation, regulatory proposal was much more expansive and burned. Symptom for the banks and credit unions than it had to be. So it has reissued, it has started the process of reissuing regulations with similarly are going to be much less good at them in terms of having to comply and have an API for open banking purposes. Now the small banking regulation, excuse me, small business lending is extremely interesting, because that is that, basically, when imposed what I call 100 like requirement on the affected banks and credit unions for small business lending, okay, you would have to you would have to say, okay, is this a minority business? If so, I’m going to collect various points of data about the demographics the people involved in the long loan for purposes of ultimately analyzing if there is a discriminatory intent behind in the in the business, in the in the banking system, with regard to small business lending. Now, clearly this is something that the Trump administration is not going to support, okay, but interesting enough. The CFPB is at least going through the process of putting this regulation out, and they might be again come come forward with a regulation that is much less bonesome than the initial proposal we have to see.
Sarah Cooke
So the other thing I wanted to ask you about is that 50 year mortgage the FHFA floated recently, which apparently President Trump The administration also came out and displeased with that, but yeah, what were you? What is that that is an extremely
Henry Meier
that’s interesting on several levels of political and the policy level, if you will. But the basic idea is, the argument for it is that, obviously, the longer you make the mortgage, the cheaper the monthly payments. Now, the problem with that is the more interest you have to pay on the lifetime of a loan. So on Saturday night or Sunday, apparently, the head of the FHFA pitched this idea to the president. He originally came out and said, Yeah, I kind of like this idea. He tweeted in support of it, and then by Monday, the White House was shooting it down because it hadn’t gone from any kind of a vetting process at all. Now you mean
Sarah Cooke
vetting process
Henry Meier
they apparently, the quote I read was that they don’t like putting proposals in front of the President that haven’t been looked at by other staff ahead of time, which which makes sense that that is, in fact, the process they use. Now, I did find the when you were asking about this before. I did find it interesting people reacting, because for years now, we’ve already had authorized both credit unions and banks to give mortgages up to 40 years, and even under existing regulation. I don’t know if any credit union has ever taken advantage of this or ex foot, but the NCUA could, on a case by case basis, under its regulations, permit even longer mortgages. Now, the reason I’m bringing this up is because 40 seems like an awful long time for me to have a mortgage so, and we do that every day. Now it’s very common. Okay, so it’s interesting what, what the difference is between 40 and 50 that all of a sudden everyone agrees that 50 is over the line, and I agree with that. It’s too much, but 40 is okay, which I find interesting. More generally, the one of the few things that Republicans, Democrats, force the spectrum, agree with is that housing is too expensive. It’s and and when you see ideas like this floated, it does reflect the frustration of coming up with policies on the government level that can actually address the issue, as opposed to letting the free market work its play out over several years well.
Sarah Cooke
And I mean, there’s also the idea of lowering the cost of housing, not building a bunch of McMansions, building starter homes for people that are affordable. But, yeah, I don’t see that.
Henry Meier
And even if you did that, that would, that would take time so and on the state level, in places like New York, you see a whole bunch of proposals like tax breaks or maybe rezoning, which is an interesting concept, but there’s really very little in the end that government can do to address the issue. And we have these incredibly unique dynamics where we now have high interest rates, whereas up until a few years ago, we had lower interest rates. So you have all these people with no incentive to sell their house because they don’t want to be stuck with higher interest rates, and you have an increased number of people who want to buy a house. But by keeping their houses off the market, one increases the price of the house, obviously, because of the interest rates, even if people are willing to pay the price, a lot of them won’t be able to finance a house at this level, the one. So at a practical level, I think federal unions, looking at this from a from a practical standpoint, should be looking at their business model and saying, why are we doing or why don’t we do more home equity lines of credit, because you have a lot of people who are going to be staying in that house that’s pretty much paid off, and then can pull equity from that house if they were given the opportunity to and another, another issue, which is very, very Interesting, is, are there things that credit unions can do to aid first time homebuyers, so, so is this the time to are there programs out there that would attract more members to your credit union by pointing out to the first time homebuyer that you feel their pain, and we’re willing to help to The extent we can?
Sarah Cooke
Yeah, yeah, hopefully, hopefully something. And I think too, like the the credit unions are an instrumentality of the federal government, and at least federal charters are and they so it’s like the perfect blend, I think, of public private solutions to the problem, which I think is probably much better than the government taking everything on itself.
Henry Meier
And this problem is not going to everyone. It’s interesting when this problem is going to end, because it doesn’t seem it doesn’t seem like we’re anywhere near the end of this huge increase in stubmen housing market really
Sarah Cooke
now huge. All right, so you’re a veteran of the credit union connection. Always give my guests the final thoughts. What would you like to close out with
Henry Meier
if, even as the NCUA slows down its enforcement, the CFPB slows down its enforcement, these floors are still on the books, and someone’s going to try to enforce them on, if not on the federal level, then the state level. So you do have a lot less pressure in terms of the day to day compliance and worry about that from a regulatory standpoint, you shouldn’t get to the point though, where you feel that this obligation you have to comply with these laws is somehow gone away. We have to see what has somehow ended and gone away.
Sarah Cooke
Brilliant wisdom. Thank you, Henry, appreciate it. Thank you for having me bye.