NCSHA Washington Report | February 14, 2025

It’s been an unsettling week for financial institutions whose businesses intersect with the activities of the Consumer Financial Protection Bureau, including many mortgage lenders, brokers, servicers, and state housing finance agencies.

The bureau, created by Congress 15 years ago in response to financial industry excesses that led to the global financial crisis, has been a punching bag for its entire history. At the same time, much of the U.S. housing finance system has evolved to operate under its many rules, and the major players tend to prefer the certainty they sometimes dislike to the unknowns in an imagined alternative regulatory regime. The agency reports that it has saved consumers more than $20 billion through its enforcement actions.

Last weekend, Russell Vought, director of the White House Office of Management and Budget, informed CFPB employees that he was now acting head and instructed them to “cease all supervision and examination activity” and “all stakeholder engagement,” pause all “pending investigations” and “enforcement actions,” and not “approve or issue any proposed or final rules or formal or informal guidance,” among other directives — immediately. Vought also said he was blocking any new funding for the agency.

On Monday, Vought emailed everyone again to say, absent formal legal approval, bureau employees “should stand down from performing any work task.”

A frantic industry lobbying effort secured such approval in the nick of time the next day to ensure the bureau’s continued regular publication of the benchmark interest rate lenders rely on to sort new mortgage loans into various regulatory categories under CFPB supervision. Housing finance providers are going to need approvals and clarifications on a host of other issues for as long as the bureau remains in its current limbo and perhaps beyond.

Many see a ray of optimism in President Trump’s nomination Wednesday of Jonathan McKernan to serve as permanent director of the bureau. McKernan, most recently a board member of the FDIC, has a stellar reputation from prior roles at the Treasury Department, Federal Housing Finance Agency, and Senate Banking Committee.

If confirmed by the Senate, he’ll have opportunities to support President’s Trump day-one commitment to “drastically lower the cost of housing and expand housing supply.” Some conservative economists, for instance, have argued that lending restrictions imposed on banks in the same law that created the CFPB depressed demand for affordable entry-level homes, leading to “tighter margins (and more risk of losses) for potential builders, pushing them away from the starter home market and toward bigger, safer, and more profitable houses.”

If McKernan could usher in a thoughtful new de-regulatory effort agenda that revitalizes entry-level home building — which now accounts for less than 10 percent of new starts — he would help the housing market deliver more homeownership opportunity at lower cost and deliver a big economic boost.

He’d have allies in governors around the country, as we mentioned last week. None more so than in his home state of Tennessee, where Governor Bill Lee is raising the alarm about his state’s loss of starter homes and calling for new state investments to spur them as part of “a housing plan that makes this key part of the American Dream possible.”

Stockton Williams | Executive Director

In This Issue

• House and Senate Budget Committees Advance Differing Budget Resolutions
• DOGE Seeks Spending Cuts, Layoffs at HUD
• Courts Extend Stay on Overall Funding Freeze But Disruptions Appear to Continue
• Trump Nominates McKernan to Run CFPB Amid Efforts to Suspend Its Activities
• White House Announces New Tariffs on Steel and Aluminum
• Daines, Tenney Introduce New Markets Tax Credit Permanence Bill
• Looking Ahead

House and Senate Budget Committees Advance Differing Budget Resolutions
The budget committees in both the Senate and House of Representatives passed vastly different budget resolutions this week. On Wednesday, the Senate Budget Committee passed its version — what’s being called a “skinny budget” — directing various Senate committees to report legislation focused on border security, energy, and defense — not tax. On Thursday, the House Budget Committee passed a resolution covering border security, energy, and defense and also calling for at least $1.5 trillion in spending cuts and a tax bill of up to $4.5 trillion intended to extend expiring provisions from the Tax Cuts and Jobs Act of 2017 (TCJA) and potentially make other changes to the tax code.

Congress will need to reconcile the two budget resolutions because both chambers must pass an identical final version to enable Republicans to use the reconciliation process to pass legislation to enact President Trump’s policy agenda. Reconciliation legislation requires only a majority vote; thus, Republicans could pass these bills without any Democratic support and without the need to overcome a filibuster in the Senate if Congress can pass a final budget resolution.

While House Budget Committee passage of the budget resolution is the first big hurdle for a tax bill, Republican leaders still face major challenges in advancing one. The House Budget Committee adopted an amendment reducing the amount available for tax cuts if Congress does not cut at least $2 trillion in spending by a commensurate amount. Thus, if committees report $1.5 trillion in savings, the amount available for tax cuts would go down to $4 trillion. Moreover, Ways and Means Chairman Jason Smith (R-MO) believes his committee will need more than $4.5 trillion to advance the president’s tax agenda. Most estimates for TCJA extension are above $4.5 trillion, without accounting for other tax priorities the president has touted, including exempting tip, Social Security, and overtime income from tax; increasing the cap on state and local tax (SALT) deductions (which many Republicans from states most impacted by the SALT cap have said is a requirement for their support); and other tax provisions Ways and Means members are seeking, including an expansion of the Housing Credit.

The Ways and Means Committee could increase the amount available for tax cuts by offsetting them with revenue-raising tax changes, increasing the importance of opposing offsets that would hurt affordable housing. Therefore, NCSHA and other housing advocates will focus on defending the tax-exemption of private activity bonds and pushing for increases in the Housing Credit.

The Senate could bring its skinny budget resolution to the floor as early as next week. The House will be on recess next week and plans to consider the committee-passed resolution on the House floor the following week.

DOGE Seeks Spending Cuts, Layoffs at HUD
Reports are surfacing that the Department of Government Efficiency (DOGE) has turned its attention to the Department of Housing and Urban Development (HUD) as it looks to reduce spending at the agency. A video message by HUD Secretary Scott Turner, released Thursday, suggests DOGE has identified at least $260 million in spending cuts. The president of the union representing HUD employees told Bloomberg Law that as much as 50 percent of HUD’s staff could be laid off. NCSHA will report more as the situation develops and more concrete information is released.

Courts Extend Stay on Overall Funding Freeze But Disruptions Appear to Continue
In response to a freeze on all federal funding imposed by a January 27 memorandum issued by the Office of Management and Budget, a group of states sought relief in federal court in the form of a temporary restraining order against the freeze, which was granted on January 31 by the U.S. District Court in Rhode Island. Despite this order, the same states argued funding disruptions continued, and the same court issued another ruling demanding compliance with the original order to suspend the funding freeze. The Trump Administration then appealed the district court’s ruling to the U.S. Court of Appeals for the First Circuit, which declined to reverse the lower court’s decision for the time being.

Against this backdrop, however, reports continue of disruptions to federal funding for several programs, including HUD’s Green and Resilient Retrofit Program and the U.S. Environmental Protection Agency’s Greenhouse Gas Reduction Fund, a $27 billion program authorized by the Inflation Reduction Act, which the new EPA administrator has said he will seek to claw back.

Trump Nominates McKernan to Run CFPB Amid Efforts to Suspend Its Activities
President Trump late Tuesday nominated Jonathan McKernan as director of the Consumer Financial Protection Bureau (CFPB). McKernan served as a Republican member of the Federal Deposit Insurance Corporation before stepping down last week. Before that, he served as counsel to then-Senator Pat Toomey (R-PA) on the staff of the Senate Banking Committee and worked for former Senator Bob Corker (R-TN). He also has served as senior counsel at the Federal Housing Finance Agency (FHFA) and a senior policy advisor at the Treasury Department. He was reportedly under consideration to head FHFA before Trump nominated Bill Pulte.

CFPB currently is being led by Office of Management and Budget Director Russell Vought. As noted above, last Saturday, Vought ordered agency staff to temporarily shut down most functions and said the administration would be cutting CFPB’s funding. During the shutdown, CFPB will not publish any new rules or guidance. At the urging of housing industry advocates, CFPB clarified it will continue to publish weekly the Average Prime Offer rate, which helps mortgage originators comply with the Qualified Mortgage and other mortgage lending regulations.

White House Announces New Tariffs on Steel and Aluminum
This week, President Trump signed a proclamation reinstating a 25 percent tariff on steel imports and a second increasing tariffs on aluminum imports to 25 percent. During his first term, President Trump imposed 25 percent tariffs on steel imports and 10 percent tariffs on aluminum, but imports from Argentina, Australia, Brazil, Canada, Japan, Mexico, South Korea, the European Union, Ukraine, and the United Kingdom were exempt. The new proclamations end these exemptions.

The White House issued a fact sheet on the new tariffs, stating it is acting “to protect America’s critical steel and aluminum industries, which have been harmed by unfair trade practices and global excess capacity.” The tariffs, which take effect March 12, are expected to significantly disrupt the construction material supply chain and further exacerbate development cost increases impacting the construction industry. Canada, Brazil, and Mexico are the largest sources of imported steel to the United States, while Canada, the United Arab Emirates, and China are the largest sources of imported aluminum.

Daines, Tenney Introduce New Markets Tax Credit Permanence Bill
Last week, Senate Finance Committee member Steve Daines (R-MT) and House Ways and Means Committee member Claudia Tenney (R-NY) introduced the New Markets Tax Credit Extension Act, S.479 and H.R.1103. In addition to making the program permanent, the bills would set the initial allocation for the program at $5 billion indexed for inflation and exempt NMTC investments from the alternative minimum tax. The NMTC program helps finance businesses and community facilities in low-income and economically distressed areas, including the commercial portion of mixed-use housing developments.

Looking Ahead

Legislative and Regulatory Activities

• February 14 | Comments Due to NCSHA | HUD Request for Information on Resilience Measures and Insurance Coverage
• February 21 | Comments Due to NCSHA | Establishment of the Optional Reimbursement Claim Alternative
• February 21 | Comments Due to NCSHA | Partial Claim Document Recording and Payoff Statements
• February 28 | Comments Due | HUD Request for Information on Resilience Measures and Insurance Coverage
• March 3 | Comments Due | Establishment of the Optional Reimbursement Claim Alternative
• March 10 | Comments Due | Partial Claim Document Recording and Payoff Statements
• March 10 | Comments Due to NCSHA | Equity Saver Sale Home Disposition Option
• March 17 | Comments Due | Equity Saver Sale Home Disposition Option

NCSHA, State HFA, and Industry Events

• February 24 | ULI Terwilliger Center for Housing: 2025 Building the Future Policy Forum | Atlanta, GA
  Stockton Williams will participate in this event.
• March 3 | American Wood Council Annual Meeting | Washington, DC
  Jennifer Schwartz will speak at this event.
• March 10 – 12 | NCSHA’s 2025 Legislative Conference | Washington, DC
• March 18 – 21 | National Affordable Housing Management Association: Top Issues in Affordable Housing Conference | Washington, DC
  Jennifer Schwartz will speak at this event.
• March 19 | National Housing Supply Summit | Washington, DC
  Stockton Williams will participate in this event.