Key facts
- US federal regulators are shifting towards a less prescriptive approach to mortgage regulation.
- This shift is driven by executive orders aimed at reducing regulatory burden, modernizing rules, and expanding access to mortgage credit.
- The Consumer Financial Protection Bureau (CFPB) is reviewing rules including TRID, HMDA, ability-to-repay, and loan officer compensation.
- Appraisal requirements are also being examined, with potential for reduced requirements on lower-risk transactions.
- The CFPB is undergoing a significant restructuring, potentially reducing staff by about 53% to around 515 employees.
- The 21st Century ROAD to Housing Act includes appraisal reforms such as a public appraisal database.
US federal regulators are increasingly adopting a less prescriptive approach to mortgage regulation, a shift driven by executive orders aimed at reducing compliance burdens, modernizing existing rules, and expanding access to mortgage credit. Experts speaking at ACUMA’s annual Make Your Mark conference highlighted that while these changes are underway, their full impact will take time due to formal rulemaking processes.
Fed Kamensky, partner and head of regulatory compliance at Weiner Brodsky Kider, noted that the focus is on reducing regulatory burden, modernizing regulations, and expanding access to credit. This includes reviews of several Consumer Financial Protection Bureau (CFPB) rules, such as the TILA-RESPA Integrated Disclosure (TRID) rule, Home Mortgage Disclosure Act (HMDA) requirements, ability-to-repay and qualified mortgage rules, loan officer compensation, and mortgage servicing provisions. The CFPB has already initiated a request for information on TRID.
Broader efforts to tailor regulations for community lenders, small banks, and credit unions could be more significant than individual rule changes. Directives also cover appraisal requirements, exploring alternative valuation models and AI tools, and potentially reducing appraisal needs for lower-risk transactions. Furthermore, regulators are shifting focus from technical compliance to reasonable underwriting and actual consumer harm, an approach already visible at the National Credit Union Administration (NCUA).
The CFPB itself is undergoing a major restructuring, with its permanent director nomination pending and potential staffing reductions of about 53%, bringing the workforce to approximately 515 employees. Examinations are expected to become more remote, limited in scope, and focused on clear consumer harm rather than technical violations, with an estimated 70 exams annually compared to 600 previously. This reduced footprint does not diminish the need for ongoing compliance efforts.
Discussions also covered the implementation of the 21st Century ROAD to Housing Act, with work shifting to state and local governments for zoning and development restrictions. Appraisal reforms within the act include codifying reconsideration of value and creating a public appraisal database. Challenges remain with an aging appraisal workforce, necessitating efforts to expand and diversify the profession. Regarding mortgage servicing, the CFPB is considering changes to proposed Regulation X amendments, with industry groups raising concerns about repeated loss mitigation reviews and language access. Regulators may also consider increasing the small servicer exemption from 5,000 to 10,000 loans.