WASHINGTON—The Trump Administration’s proposed budget for 2020 includes similarities to those it has previously proposed, including bringing the CFPB under the congressional appropriations process, eliminating the Community Development Financial Institutions (CDFI) Fund, increasing government-sponsored enterprises' (GSEs) guarantee fees, and reforming the National Flood Insurance Program (NFIP).
Taking greater control over the CFPB has long been a priority of the administration. The agency was previously headed on an interim basis by Mick Mulvaney, now President Trump’s chief of staff. The Bureau currently receives its funding through the Federal Reserve. The budget also recommends cutting the bureau's mandatory funding in 2020 by $23 million, with further reductions in subsequent years.
In addition, the budget proposal recommends bringing the Financial Stability Oversight Council's (FSOC) budget under the congressional appropriations process, but would not apply directly to the council's members. FSOC members include the NCUA, CFPB, Federal Housing Finance Agency, Treasury Department, Federal Reserve, Office of the Comptroller of the Currency, Securities and Exchange Commission, FDIC, Commodity Futures Trading Commission, Office of Financial Research and Federal Insurance Office, NAFCU said. NCUA is an independent agency funded by credit unions.
‘CDFI Industry Has Matured’
Similar to Trump's FY2019 and FY2018 budget proposals, the president again recommends eliminating funding for the CDFI Fund's grant programs, saying "the CDFI industry has matured." It would provide $14 million for 2020 to cover existing commitments and administration of the CDFI Fund's other programs. In the prior Congress CDFI funding was fully restored by Congress.
NAFCU and CUNA have both stressed to Congress the importance of grants provided to credit unions through the CDFI Fund to better serve low-income members and underbanked communities.
Trump's FY2020 budget proposal would increase the additional fees GSEs charge on their usual guarantee fees from 0.1 percentage point to 0.2 percentage point and extend it through 2024.
“Although the administration argues that the increased fee ‘would help to level the playing field for private lenders seeking to compete with the GSEs, NAFCU has fought to maintain low guarantee fees in order to ensure equal access to the secondary mortgage market. By increasing the fee, it is likely to impede some credit unions' access to the secondary market,” NAFCU said.
Eliminate GSE Allocations
The budget would also eliminate the GSEs' allocations to the Housing Trust Fund and Capital Magnet Fund, which provide funding for affordable low-income housing, citing "a greater role for state and local governments and the private sector in addressing affordable housing needs."
In addition, the proposal requests $20 million to modernize the Federal Housing Administration's information technology systems, which will be financed by a "modest new fee on FHA lenders," potentially increasing costs for credit unions and borrowers to make and obtain FHA loans.
The NFIP's Flood Hazard Mapping Program would have its discretionary appropriation reduced by about $163 million under the proposed FY2020 budget. The budget recommendation also suggests ways to increase efficiency in the program, including by "incentivizing increased State and local government investments in updating flood maps to inform land use decisions and reduce risk," NAFCU noted.
Small Business Administration (SBA)
“The FY2020 budget proposal requests $820 million in new budget authority – which is only about a 17% increase from the 2019 estimate – though it says it will be ‘offset by fiscally responsible proposals to provide SBA the flexibility to adjust existing fee structures across its business loan guarantee programs,’” NAFCU said.
The budget also recommends amending the Small Business Act to increase the loan limit for 7(a) express loans from $350,000 to $1,000,000.