Election Impact on Congress and Key Committees

By James E. Hyland, Esq.
TLTA Federal Legislative Council
The Pennsylvania Avenue Group

The election last week of Donald Trump as president, combined with Republican control of the House and Senate, will have a major impact on the land title industry. We think it will largely be positive, but significant change is ahead.

Most of Washington, D.C. did not expect this election result. As such, the transition (and the reaction from Congress) has been slow to form, but it is beginning to take hold. Congress has to wrap up spending bills for the current fiscal year in a “lame duck” session from now until mid-December. The new Congress will be sworn in on Jan. 3 and the president takes office on Jan. 20.

Texas will be well positioned in the new Congress. Rep. Jeb Hensarling (R-TX) is likely to remain as Chairman of the Financial Services Committee. He has been rumored to be a candidate for Treasury Secretary as well. Kevin Brady (R-TX) will chair the powerful Ways and Means Committee, which has jurisdiction over tax, trade and health. Texans also chair the defense and agriculture committees.

It is all but certain that there will be a major tax bill in 2017. Just as in the former Bush and Clinton administrations, the first year of a presidency is the best opportunity for changing tax policy. The land title industry will be working to ensure the tax code remains friendly to housing and real estate. We will be focusing on the home mortgage interest deduction, the tax rate on gains from the sale of real estate and like kind exchanges.

Turning to financial services, there will be major changes to the CFPB. We expect that the agency will be restructured in a significant way, perhaps as a five-person board or by returning regulation back to the prudential bank and credit union regulators. Democrats, like Sen. Elizabeth Warren, will vigorously fight these reforms; but under Congressional rules, a reconciliation is a budget vehicle that requires only a 51- vote margin in the Senate (this was the vehicle used for Obamacare). The reconciliation process is confined to issues with budget impact and CFPB structural reform will likely come under that concept.

A federal case declaring the CFPB structure unconstitutional that was brought by a Texas bank was recently decided in favor of the plaintiffs. The remedy, cited by the U.S District Court of Appeals, was that Richard Cordray, the head of CFPB, was an “at will” employee and could be removed by the president any time. Until this ruling, it was thought Cordray could continue to serve into the next  administration under his term. The CFPB has said it will appeal the decision to the Supreme Court, but it may be up to the new administration, in which case that ruling may stand and Cordray could be dismissed on Jan. 20. This is still to be determined.

Brian Johnson, counsel for Jeb Hensarling, is leading the transition team for financial services. TLTA has met with Brian during our visits to Washington, D.C. We visited with him before the mark-up of the Financial CHOICE Act to discuss issues of interest to the title industry. The overall transition team is being led by Mike Pence, vice president-elect and Rick Dearborn, the chief of staff to Sen. Jeff Sessions (R-AL). Marc Short, a former chief of staff to Sen. Kay Bailey Hutchison, is advising Pence. Reince Priebus has been named chief of staff at the White House. Steve Bannon, CEO of Breitbart News, has been named as senior advisor in the White House.

Another issue the title industry will be monitoring will be reform of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. We have been concerned in the past about unilateral actions by Fannie and Freddie or their regulator, the Federal Housing Finance Agency (FHFA), which may impact the land title industry, such as not requiring title insurance for mortgages they insure. Reforming the GSEs has been a long-held goal of the Republicans in Congress. This will likely resurface as an issue in 2017 and beyond. Three years ago, when the House considered a GSE reform bill, TLTA and ALTA worked to require that any mortgages sold into the secondary market would have to have title insurance in order to ensure the soundness of the real estate system and mortgage marketplace. Our industry is better positioned to react when Congress makes these reforms rather than the executive branch. We will again be working closely with ALTA on this and other issues. We met with them before the election and have scheduled a meeting with them post-election.

We expect 2017 to be a very busy legislative year, and TLTA will be working hard to shape any agenda items that will impact our industry.