ACUMA ONpoint
ACUMA ONpoint
The One Big Beautiful Bill: How Reconciliation Shaped Credit Union Policy
The "One Big Beautiful Bill Act" (OBBA) passed through Congress along party lines, preserving the credit union tax status while making significant changes to mortgage policy and CFPB funding. Zach Pfister joins the ONpoint Podcast policy series and breaks down the political dynamics behind major policy developments affecting credit union mortgage lenders and previews upcoming legislative challenges.
In this discussion with ACUMA President Peter Benjamin, Zach and he discuss:
- Credit union tax status was preserved despite being initially considered as a potential revenue source.
- Successful advocacy efforts included bipartisan congressional opposition and thousands of credit union members visiting Capitol Hill.
- CFPB funding cut by nearly 50%, from 12% to 6.5% of the Federal Reserve's operating budget.
- FHFA Director Pulte is making significant policy announcements via social media.
- Changes to GSE conservatorship are potentially coming in the fall with a "novel approach."
Tune in now to get this and much more!
Sponsored by Loan Vision.
The views and opinions expressed in this podcast do not necessarily reflect the views or positions of Acuma, its board of directors, its management staff or its members. The podcast discussion presented is conversational in nature and for general information only.
Speaker 2:Hello and welcome to Actives on Point podcast, the policy series where we focus on policy issues impacting the credit union mortgage industry. I'm your host, peter Benjamin. Before we get to our episode, just a quick word from our sponsor.
Speaker 3:This episode is being brought to you by Loan Vision. Is your credit union looking to turn your accounting department into a profit driver? Loan Vision can help. Our platform delivers real-time data, loan-level insights and automations to streamline workflows and improve control over financial performance. Transform your cost centers into revenue generators by equipping your team with the tools needed to better serve your members. And don't miss our monthly webinar series, where we share key strategies and best practices to help credit unions optimize their mortgage operations. Register today at wwwloanvisioncom under our upcoming event speech.
Speaker 2:Joining us today as our resident expert is Zach Pfister, policy director with Brownstein. Zach, my friend, how are you doing today?
Speaker 4:Doing great Peter.
Speaker 2:Awesome, awesome, just leaving it there, just doing great. All the living, living the dream, all the. I want to say other, another word, but all the stuff happening in DC just has you just living the dream of fun, exciting times. Man, tell me what is going on in DC that our credit union members need to know about, please, our credit union members need to know about, please.
Speaker 4:Well, it's been a wild summer. Congress is fresh off of passing the one big beautiful bill act, the OBBA, or, as some might call it, the OB3.
Speaker 2:I've heard some refer to it as O3B, but let's just call it the reconciliation bill.
Speaker 4:By the way, I'm excited to be able to write off my private jet. Well, you're welcome. Congress was hard at work on that. So, look, there was a lot of political capital that went into pushing that bill across the finish line. It is essentially the bulk of, and it's the same party that's controlling the and procedural requirements that traditionally adhere to other legislation. So instead of needing 60 votes to pass legislation in the Senate, the Senate simply needs a simple majority, and Republicans currently control 53 seats in the Senate and therefore they had some wiggle room. So Republicans had a cushion, have a cushion in the Senate 53 seats. Ultimately they could lose three seats, with the vice president serving as a tiebreaker.
Speaker 4:The bill passed in the wee hours of the night, followed by House passage just before 4th of July. So the president got his July 4th bill signing and all the trappings that came with that, and now you know I would say that there's been some. It's served as somewhat of a pressure relief valve here. There was a lot of focus and a lot of time spent on that bill and now Congress is kind of shifting to more traditional items on the agenda that they still need to deal with but they have kind of put on hold for the last seven months and so, as we're looking into these last couple of weeks going into the congressional recess, the August recess, there's been a pivot to appropriations bills. The only problem is that the appropriations process has been a bit discombobulated and on ice for the last several months because of the reconciliation bill, so everything is a little bit farther behind as compared to where it would typically be this time of year.
Speaker 4:We will probably be lucky to see Congress or the House pass one or two appropriations bills next week at best. This is basically going to put them into September and the September 30th government funding deadline. With very little to show for it. We are very likely to come into September and veer straight towards that deadline with no progress made, no bipartisan cooperation, and it's going to create another cliff. It's likely going to result in another CR that carries into December, at which point there's a growing consensus that that probably means one year. Continuing resolution probably means one year continuing resolution, straight funding through the election, because we are also, when we come back from, uh, august recess, we will also be in in unofficial campaign season for the midterms, even though they are still uh, 16 months away so I there was a lot you know in the OBAA, whatever you want to call it.
Speaker 2:You know some controversial, you know some questionable, depending on what side of the aisle you're on or where your tax bracket is, where your tax bracket is. But you know for us, as you know credit union mortgage lenders, you know some things that are favorable right, like our tax status is preserved as part of this. Now, that was kind of a surprise that that was even in question as part of this right.
Speaker 4:To me. I don't know if I was surprised. The reality of the situation is that whenever you're going to start with a bill that is four to six trillion dollars in size, they start with a menu and everything's on the table. It's up to industry and stakeholders to get off that menu as quick as possible and there are a few organizations and industries better equipped to do that through their grassroots, through their credit union members, than credit unions and all the respective trades that were involved in that success. I think that there was an inflection point earlier in the year when the credit union tax status showed up on a Ways and Means Committee draft menu of potential pay-fors, and credit unions were already long activated on this. So it happened to also coincide right around some significant fly-ins and generally fly-in season for credit unions. So I would argue that on the side of the House it was probably poorly timed for that draft to start circulating in those meetings, even if informational to be taking place while thousands of credit union members were literally in town meeting with their members of Congress. I don't know that the status was ever truly in the top tier of threats, but that's only because of how strong the credit union movement has been on this issue for years. It is at the core in terms of foundational elements of credit unions and what they stand for, and that message resonated consistently across the board with Democrats and Republicans. You saw bipartisan members put their names down in writing, which is a hard thing to do, especially if you're in the majority and you share the party with the White House and they're trying to move an agenda and you're putting your name down as a red line on certain provisions. Now we saw that elsewhere, but we definitely saw that on the credit union tax status and I think it made a huge difference. Coming out of the reconciliation bill, the Senate version also maintained the tax status. The reconciliation bill the Senate version also maintained the tax status. In addition, there were, to your point, other cuts and developments along the way that also impact credit unions, probably from a more positive lens.
Speaker 4:In terms of the CFPB, I don't want to say that this is necessarily a plus or a minus. That's for every stakeholder to decide, but the CFPB funding was significantly reduced. They started at Like half right. Well, yeah, it bounced around a bit. So the House bill reduced it from a 12% draw to a 5% draw. This is the amount of the Fed's operating budget that the CFPB can use for its own funding. So it went from 12% to 5%, so a little over 50%.
Speaker 4:The Senate bill then zeroed it out and the parliamentarian who quickly became the most popular unelected government official in DC over the summer ruled that out of order and in violation of what's known as the Byrd rule. It's basically the rule that helps the parliamentarian decide whether or not a provision complies with the budget reconciliation process. Now, that's a little weedy, but long and short of it is. The Senate Banking Committee went too far in her opinion, so they had to go back to the drawing board and they came up with a 6.5% draw, so roughly a 45% or 48% cut, just over 50 percent, right, and that wasn't coincidence, right, and that was after consultation with the parliamentarian and supportive of the CSPB.
Speaker 4:They're going to continue to have their hands tied on that funding draw for the foreseeable future, basically until Democrats at some point in time may find themselves with their own trifecta, because that's the only likely scenario in which that funding can be restored. What I would say looking forward is, if you look at look at, there's a hearing this week in House, financial Services heavy focus on the committee's continued efforts to roll back CFPB rules, roll back CFPB authorities. Of bills that have been noticed for this week. They kind of give you the sense of direction where the House wants to continue to move with the CFPB. I would say that this funding cut is not the last time you're going to see Congress attempt to pare down the CFPB's reach.
Speaker 2:And so you know kind of sticking with. You know this, I won't actually say CFPB, but let's also stick with mortgage. You know the one big beautiful bill also made permanent. You know the amount that someone can write off for their you know interest write-off as well, as made permanent or brought back the mortgage insurance write-off, right, Right, and so kind of walk us through that if you could leave it at.
Speaker 4:The goal of the tax riders in this legislation was to ensure that as many provisions of TCJA 1, right, the original Tax Cut and Jobs Act were solidified for perpetuity, and so they use the term permanent, whereas the you know there are other provisions in this bill that you know that have an expiration date again, and so I can't recall off the top of my head, but there's an expiration date for the salt deduction.
Speaker 4:There are expiration dates that you know create new inflection points in the future, most of which not by will be after the president's term concludes, after his second term concludes. But it sets up future battles for tax policy. Now, some of the key provisions, some of the core provisions, the individual rates, for example, they were successful in cementing these, but there are going to be inflection points in the future. And I should say back to my earlier point in the event that Democrats at some point in the future have the House and the Senate and a Democratic president, we should absolutely expect them to use the same budget authorities and take up a partisan reconciliation bill that almost certainly touches on tax policy. Right, democrats, this is a one-party affair budget reconciliation, it's never bipartisan. One party affair budget reconciliation. It's never bipartisan, so there wasn't a single Democratic vote for this. There wasn't a single Republican vote when Democrats did reconciliation. So we should expect that even things that are permanent are only permanent so long as there's not another party with a trifecta that may want to make changes in the future.
Speaker 2:You know. So it's all very interesting. I mean this, it's just, it's interesting. I kind of just like a loss for words, right, I mean, but OK, so we talked about it's interesting. I kind of just had to loss for words, right, I mean, but OK, so we talked about Oba, the one big beautiful bill. What else is happening in DC? What? Is happening in DC.
Speaker 4:Yeah, a little bit of both. So I mentioned, you know, we are now entering into the Q3, q4 period, which it's interesting because we just got off of a nonstop six month you know chaos train in terms of you know hours spent members in town working on this big piece of legislation. And now we are over the hill in some respects where we are going to see a bit of a low heading into the traditional August recess. But that doesn't mean whenever they get back on the other side of this in mid Q3 and at the end of Q4, they're not going to have the same problems that they left whenever they left at the end of July. So government funding will be the next big inflection point. Government funding runs out on September 30th. We've seen this show before. We're getting very accustomed to how this works. In September they will have three weeks when they get back to cut a deal to keep the government open.
Speaker 4:We should expect that Democrats have no reason to come to the table on anything. Last time they weren't even invited to the table and you saw the continued resolution in the spring result in full Democratic opposition in the House, minus one or two votes, and when it got to the Senate. There was some criticism in terms of how Senate Democrats handled it, because they waffled a little bit in terms of their position of default being Democrats don't shut down the government. I mean, that is a long held foundational belief that you know. Democrats are the pro-governance and pro-government party. Right, they will tell you that, they will pride themselves on that and, as a result, they don't often have the same leverage in some of these instances, because if they have to share the blame on shutting down the government, if they have to share the blame on shutting down the government, they don't often do it, and so they provided the seven or eight votes needed to get that bill over the over the finish line dose of criticism from the party base and from House Democrats for not, you know, being more firm in terms of putting forward some opposition Democratic argument would be that Republicans control all of Washington. They can find a way to keep the government open if they want to do it in a way that results in further cuts or further furloughs or further workforce reductions or whatever it may be, because the difference between now and previous years, when the two parties come together on a spending deal, is that there's the belief that the executive branch will actually spend the money. But what we're seeing now is the executive branch is not spending the money that Congress has directed them to spend. Instead, they're sending back rescissions packages that want to make further cuts, or they're simply terminating programs and not rehiring the program officers that would then distribute those funds, or they're making executive decisions to close departments even though there are legally you know, legally dubious questions around whether or not they have the authorities to do so, and all of this is playing out in the courts as well. So there's a very bad taste in terms of bipartisanship among the Democrats, and I think that there's a significant dose of pessimism among the Republicans, because they have their own internal problems with, you know, with juggling the needs of their moderates in order to get reelected but the desires and aspirations of their farther right wing, who would like to see even more cuts than where they are now. So September is going to be that entire month.
Speaker 4:We also have the NDAA out there, the National Defense Authorization Act. This is the one other guaranteed vehicle for the rest of the year and, as Peter knows, it often sometimes carries other pieces of legislation. We should expect every member in Congress who has a backlog of priorities that has been sitting on the shelf for the last seven months, to be looking at the NDAA as a potential vehicle to carry their priority. The problem here is that, similarly, these same factions in Congress often decry the use of these larger bills, just to end up being looking like Christmas trees and that is an official congressional term often used.
Speaker 4:Thrown out there that you don't want these vehicles that often show up at the end of the year right before the holidays, to turn into a Christmas tree and carry all the different ornaments that Congress just didn't get to, and so it creates new divisions within the Republican conference and the Democratic caucus as to how that should proceed. Ultimately, it'll boil down to how much Congress wants to do some horse trading or whether they want to keep it clean. But seeing as it is one of the only other vehicles out there, we should expect that all members set their sights on there as a possible vehicle to carry their bills. Trigger leads last year Peter was the one I was referencing, and it very well could find its way back. If these two versions aren't rectified that passed the House and Senate before, then they could look to rectify it. Just right alongside the NDAA.
Speaker 2:All right. So thank you for welcoming us through that. Last question, Last topic. You know we always talk about CFPB, but I think the big one that we have to talk about right now is everything happening over at FHFA. So what is the latest and greatest happening over at FHFA?
Speaker 4:So for anyone who follows or who has historically followed FHFA news alerts, you know that in the current administration the news alerts are often delivered via tweet on X, and Director Pulte has certainly been active on social media. It is clearly his preferred format and medium of communication. Lately he's been on a bit of a bent calling for the resignation of the Federal Reserve Chairman, jerome Powell. He normally makes at least one comment a day on that effect. He's obviously trying to tie in Powell's tenure with kind of a static baseline on homeownership and on the general mortgage market. Clearly it's no secret. It's not a trade secret. Obviously the president wants Jerome Powell to lower rates. He says it quite often. Director Pulte also wants Powell to lower rates. We all obviously know that Powell himself cannot singularly lower rates, but there are many factors that go into account there. So that's one thing. I think we're all accustomed to where the executive branch is right now in terms of their desire for rates to come down. But Pulte has also made some other recent announcements, some quite interesting. Some quite interesting. He announced last month that verifiable cryptocurrency holdings can now be counted as eligible borrow assets. He just the other day he announced the the allowance of the Vantage score 4.0 as an option in in the vein of a one or the other lender choice, whereas the past administration kind of they structured it in a different way. That would be kind of a new requirement. This is kind of this will give the option of either going with the traditional three credit reports or your Vantage score. So that was an interesting development.
Speaker 4:And then he also made a. He also made an announcement recently, one that has been actually garnered some support from Democrats over the years too allowing rental history on mortgage applications to help determine your credit worthiness for a mortgage application. He also then was seemingly a little upset about the lack of news coverage on that, and I tend to agree I was a little surprised that they didn't get more attention in the Capitol Hill news rags and in the housing alerts that we all get. But he continues to amplify that on Twitter, which he has a, or on X, which he has a pretty sizable following as well.
Speaker 4:But lastly, I would say conservatorship really still on the minds of Pulte, clearly still on the minds of Pulte. I believe he had a meeting with Secretary of the Senate last week about it. Not a lot of details still there about what they're looking to do, but it is clearly something that they plan to make announcements on in the coming months. There's been a heavy dose of focus on it and we could see some announcements that might be a little, you know, considered a little outside the box as to where they were on conservatorship last administration during the last Trump administration. Really get that far, but some of the more recent comments suggest that they are they may be taking more of a novel approach on this, so time will tell, but we do expect comments on that in the fall, all right?
Speaker 2:Well, as always, I mean, there's never a shortage of things for us to talk about, and I'm sure we could keep talking about several of these things and dive in a lot more, but you know we're at time. So, zach, thank you very much for taking time out of your busy schedule to sit down with us and have this quick little conversation. Always enjoy learning as much as I possibly can from you, but gotta let you go. So, zach, thank you very much.
Speaker 4:All right, thanks Peter, always a pleasure.
Speaker 2:And to quickly close out, thank you again to Loan Vision for sponsoring today's episode and to all of you. We know your time is valuable. Thank you for tuning into the latest episode of Action Zone Point Podcast. We hope you enjoyed it. Until next time. Be well, my friends.
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