UDAP advisory rescinded after concerns it would increase costs, overreach
The Federal Housing Finance Agency (FHFA) has rescinded an advisory that would have required Fannie Mae, Freddie Mac, and the Federal Home Loan Banks to monitor and enforce unfair or deceptive acts or practices (UDAP) by lenders, servicers, and third parties.
The now-withdrawn Advisory Bulletin 2024-06, issued last November, laid out specific expectations for how these regulated entities should comply with Section 5 of the Federal Trade Commission Act.
The bulletin covered a wide range of activities – from loan origination and servicing to appraisals, advertising, and credit decisions – asserting that the GSEs could be held directly or vicariously liable for UDAP violations, including those committed by third parties, if they “knew or should have known” about the misconduct.
The guidance also flagged common UDAP risk factors like poor board oversight and unreliable data, and urged the GSEs to implement stronger compliance frameworks with clearly defined policies and procedures.
But the bulletin sparked concern across the mortgage industry, particularly among lenders and industry groups who argued that it blurred the line between regulator and market participant.
Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit welcomed the FHFA’s decision to reverse course.
“MBA supports the rescission of this advisory bulletin and thanks Director Pulte for prioritizing this issue in response to our members’ concerns, which we raised at the time of the policy’s release in November and reiterated to the Director immediately upon his confirmation,” Broeksmit said in a statement.
He added that the November bulletin “wrongly established the GSEs as compliance regulators” and overlapped with existing federal and state oversight of UDAP rules. According to the MBA, this would have likely translated into higher costs for lenders and consumers, without delivering additional consumer protections.
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“Common sense regulation and oversight is crucial to ensuring that the GSEs operate in a safe and sound manner that allows them to continue their pivotal role in providing affordable homeownership and rental housing opportunities for all Americans,” Broeksmit said.
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