The recent developments surrounding the Consumer Financial Protection Bureau (CFPB) have left many in the mortgage industry wondering what comes next. With Acting Director Russell Vought halting all rulemaking, enforcement actions and examinations, some may be tempted to believe that the regulatory burden on Independent Mortgage Banks (IMBs) is lifting. However, this assumption is dangerous.
Regulation is not disappearing — it’s shifting.
Even if the CFPB remains inactive, the statutes governing our industry remain fully enforceable. State attorneys general, financial regulators, and even private litigants will take up the mantle of enforcement. If IMB executives fail to recognize this, they may risk legal and financial consequences.
Regulatory framework still intact
The Loan Originator Compensation Rule (15 U.S.C. § 1639b), the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), and the Truth in Lending Act (TILA) remain fully enforceable. Violations can still be pursued by state regulators or through private rights of action. Many of these laws provide for damages and attorney fees, making enforcement an attractive option for plaintiff’s attorneys.
Even though the CFPB may be effectively on pause, state regulators have received explicit encouragement from the Bureau itself to take action. A recent CFPB report issued on Jan. 14 outlined specific steps states can take to bolster consumer protections, ensuring continuity in enforcement at the state level. In progressive states, expect to see stepped-up examinations and a heightened focus on consumer protection.
State-Level enforcement is here to stay
As CFPB enforcement slows, expect state regulators and attorneys general to fill the void. Some states have already begun taking enforcement actions independent of the CFPB, ensuring that mortgage regulations remain strictly upheld. In heavily regulated states such as California, New York, and Illinois, lenders should anticipate aggressive examination cycles and a willingness to pursue violations that the CFPB may have previously handled.
Additionally, private litigants have room to pursue cases under existing regulations. Mortgage lenders should be on the watch for a rise in litigation related to LO compensation, fair lending, and RESPA compliance — particularly in states where regulators are poised to take a more proactive stance.
Potential future shifts: The risk of retrospective enforcement
Even if the current administration continues to weaken the CFPB, this can be undone in a future administration. The reality is that all existing violations remain on the books. If a future CFPB leadership takes a more aggressive stance, IMBs could face retrospective enforcement actions for activities taking place today. This means lenders cannot afford to relax compliance programs under the assumption that oversight has disappeared.
The Mortgage Bankers Association (MBA) has already indicated that many of its reform recommendations for loan officer compensation and RESPA modernization are on hold, pending further regulatory clarification. This leaves lenders in a precarious position, where compliance requirements remain, but enforcement mechanisms are uncertain.
A legislative solution is needed
If de-regulation is the goal of the industry, then IMBs and industry stakeholders must advocate for legislative action to fully unwind regulations rather than relying on temporary enforcement suspensions. The Mortgage Bankers Association and other advocacy groups are working to push forward reforms to modernize LO compensation structures, RESPA, and servicing rules. But without Congressional action, many of these rules will remain dormant, only to be possibly reawakened at a later date.
Executives must recognize that while enforcement may be slowing at the federal level, the legal framework remains in place, and compliance obligations have not changed. Relying on administrative policy changes alone is not a strategy — it is a temporary reprieve that could be reversed.
What IMBs can do now
- Strengthen compliance programs: Maintain rigorous self-regulation. Do not assume CFPB inactivity means non-enforcement at the state level.
- Monitor state-level activity: Stay updated on new enforcement priorities in key states, particularly those with a history of aggressive financial regulation.
- Engage with industry advocacy efforts: Support legislative efforts to permanently resolve regulatory uncertainty.
The industry cannot afford to assume that the absence of federal enforcement equates to deregulation. The rules remain intact, the risks are real, and state regulators are prepared to act.
Matthew VanFossen, CMB, is CEO of Absolute Home Mortgage Corporation.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this piece: sarah@hwmedia.com
