The CFPB is being reined in – but rules and standards will remain
The Trump administration set about dismantling a key mortgage industry regulator over the past week – but that doesn’t exactly mean the market is on the verge of becoming a free-for-all.
Key officials at the Consumer Financial Protection Bureau (CFPB) resigned and others were laid off as the agency shuttered its doors last week, with new directors ordering a freeze to all rulemaking and enforcement activity.
While the bureau has a prominent critic in Department of Government Efficiency (DOGE) leader Elon Musk, even its complete winding-down wouldn’t turn the mortgage market into a lawless wilderness where anything goes, according to litigator Chava Brandriss.
The Davis Wright Tremaine LLP partner told Mortgage Professional America that the recent cull witnessed at the CFPB didn’t mean rules were vanishing, and highlighted the existence of other bodies that were still enforcing guidelines and regulations.
“We all still have to comply with all the laws that the CFPB has jurisdiction to enforce,” Brandriss said. “And there are also other regulators – consumer, state regulators, banking regulators – depending on whether a mortgage participant is a bank originator, or servicer, or nonbank. You’ve got different regulators and consumers out there still looking to enforce the laws.
“And there will be likely another iteration of the CFPB in a future administration that will look back over what’s happening now. So I think, in general, what we’re talking to our clients about is there isn’t likely to be a huge impact on how businesses view their own obligations in monitoring their own compliance activities.”
The Trump administration moves to curtail the CFPB, with Acting Director Russell Vought halting operations and top officials resigning. Elon Musk signaled the bureau’s demise, while Democratic senators warn of risks to consumers.https://t.co/vcame6HfpP
— Mortgage Professional America Magazine (@MPAMagazineUS) February 13, 2025
How will things change with the CFPB out of the picture?
The most obvious change to come about from last week’s purge is that supervision has been paused, meaning a lack of communication in some respects with those industry members and companies that had found themselves under investigation or supervisory examination by the CFPB.
That’s not to say, though, that the industry is now getting away scot-free – and while the Trump administration has not revealed its plans for a CFPB replacement, the prospect has been raised of other enforcers, including states taking a more aggressive position to fill the void left by the bureau.
Still, some things will change for the industry. “There are certain rules that the industry was already thinking about how to comply with that I think we can probably predict might end up not going anywhere,” Brandriss said.
“Specifically for the mortgage servicing industry, there had been the proposed rulemaking changes to try to streamline the loss mitigation process under Regulation X and that rule was proposed this past year, but wasn’t finalized before the administration changed. So it seems unlikely that the rule will be finalized in its current form, although there may be some appetite to finalize it or to repropose it in a different form.”
Another pending rule change directly impacting the mortgage industry that’s now unlikely to see the light of day: one proposing that the CFPB examination manual for unfair and deceptive practices (UDAP) include discrimination among those practices.
That amendment was already challenged in the courts with the CFPB opting against participating in oral argument in appeal to the Fifth Circuit Court of Appeals. “It seems likely that perhaps the Fifth Court would rule in favour of the District Court, which had already enjoined the rule, but it also may be that the CFPB just decides to affirmatively kill the rule on its own,” Brandriss said.
Was the mortgage industry better off with a strict regulator?
The reining in of the bureau, though, shouldn’t see industry members believe they have leeway to ditch or relax their own compliance applications – and it could also leave space for confusion or disarray in the immediate term with little clarity on who’s enforcing what, according to Brandriss.
“A lot of attorneys and people who work in the industry and who run consumer financial services [have been expressing the view] that having too much mayhem doesn’t really, in the end, do anybody any good,” she said.
“When you have clear rules of the road, all participants can know where they stand and organize their businesses, but you know the laws are still out there. But if there’s mayhem in the primary regulator for a lot of these regulations and laws and that vacuum is going to be filled by different state enforcement initiatives, other financial regulators – in a lot of ways, there’s less predictability in a way that may not necessarily be positive.”
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