1.Who is Jonathan McKernan?

McKernan’s background suggests that he will prioritize deregulation and financial industry flexibility. His professional experience includes:

♦  Serving as a Board Member at the Federal Deposit Insurance Corporation (“FDIC“), where he played a key role in shaping financial regulations and oversight.

♦  Holding senior positions at the Federal Housing Finance Agency (“FHFA“) and U.S. Treasury Department, focusing on financial policy.

♦  Advising Senator Bob Corker (R-TN) and Senator Pat Toomey (R-PA), both of whom have supported a lighter regulatory approach to financial markets.

His tenure at the FDIC was particularly notable for his strong opposition to Basel III capital rules, which he argued imposed unnecessary burdens on banks. He also co-chaired a special investigation into workplace misconduct at the FDIC, advocating for reforms.

2.A CFPB Director with a Different Vision

McKernan has been an outspoken critic of regulatory overreach, particularly when it comes to financial institutions and mortgage lenders. His previous statements and voting record suggest that he will push for:

♦  McKernan has consistently argued that compliance costs stifle market competition and create barriers for small lenders.

♦  He has criticized the CFPB’s aggressive enforcement stance and is expected to limit investigations, penalties, and lawsuits against financial institutions.

♦  He has advocated for a more structured, data-driven approach to regulation, arguing that some of the CFPB’s past rulemakings lacked sufficient economic justification.

♦  McKernan supports responsible risk-taking in financial markets and opposes excessive regulatory interference in mergers and bank formation.

♦  He has criticized Diversity, Equity, Inclusion, and Accessibility  policies at financial agencies and has called climate risk regulations a distraction from core safety and soundness concerns.

3.The Immediate Impact on the CFPB

McKernan’s nomination has already sent shockwaves through the CFPB, prompting key resignations. On February 11, Lorelei Salas, Director of Supervision, and Eric Halperin, Director of Enforcement, both resigned, reportedly due to directives from Acting Director Vought to halt all Bureau activities.

With the agency in a state of transition, several CFPB initiatives could be delayed, revised, or scrapped entirely:

♦  The Bureau was in the process of finalizing small business lending data collection rules, credit card late fee regulations, and debt collection oversight. These may now be paused or rolled back.

♦  The CFPB had increased scrutiny of mortgage servicers and non-bank financial institutions. That emphasis may shift toward a lighter-touch regulatory model.

♦  The Bureau’s litigation pipeline could slow down, with McKernan likely favoring settlements over aggressive penalties.

4.What This Means for Mortgage Lenders and Financial Institutions

For mortgage lenders, banks, and financial institutions, McKernan’s confirmation could mean a more favorable regulatory environment. Some key anticipated changes include:

♦  Less scrutiny on mortgage lending practices – The CFPB under Biden had increased oversight on loan servicing, fair lending practices, and non-bank lenders. McKernan is expected to scale back these efforts.

♦  A slowdown in enforcement actions – The CFPB has aggressively pursued UDAAP violations, particularly in loan origination and servicing. This could shift toward a more industry-friendly approach.

♦  Potential rollback of recent rulemakings – Rules aimed at curbing credit card late fees, debt collection, and overdraft charges could face review and modification.

♦  A different approach to fintech and bank partnerships – The CFPB’s scrutiny of “buy now, pay later” services and digital lenders could be relaxed.

5.What Happens Next?

McKernan must first undergo Senate confirmation, which is expected to be a contentious process. While Republicans control the Senate, some moderate Republicans may push for assurances that consumer protections won’t be entirely abandoned. In the meantime:

♦  The CFPB remains under Acting Director Vought, who has already begun curtailing the agency’s activities.

♦  Key officials within the Bureau may continue to resign or be replaced, further accelerating the transition.

♦  Stakeholders in the mortgage and financial services industries should prepare for a new compliance landscape, with potential revisions to rulemakings and enforcement priorities.