- Over 90% of CFPB staff, including its mortgage team, face layoffs, causing problems for federal oversight.
- Courts have temporarily stopped these layoffs, making rules less clear.
- State mortgage rules are getting more complicated as states step in where the federal government pulls back.
- Experts say you should keep more documents and records because rules are being enforced differently.
- Even with less oversight, following mortgage rules is still very important to lower your risk.
With over 1,400 of the Consumer Financial Protection Bureau’s (CFPB) 1,700 employees facing layoffs — and this includes everyone on its mortgage markets team — the mortgage industry is getting ready for big changes in how rules are checked. Some lenders might think this less federal checking is a chance to make things simpler. But experts warn against getting too comfortable. When the main authority is weaker, many different state mortgage rules will likely pop up. This means the rules could actually get harder to deal with, not easier. In busy markets like Las Vegas, where nonbank lenders do a lot of business, this change brings new legal and work risks.
What’s Happening at the CFPB?
The Consumer Financial Protection Bureau is making some of the biggest staff cuts in federal agency history. More than 90% of its workers — including everyone on the mortgage compliance team — were told they would be laid off. This leaves the agency with only about 200 employees. These major changes have made the future of checking mortgage rules very unclear.
The staff cuts have made many people wonder how the Bureau will still do all the work it’s supposed to do. The CFPB was set up to have power over financial companies. Its job is to make sure consumer protection laws are followed and to be a main rule-maker. It has 87 jobs given to it by law. These include watching over mortgage loans, making sure lending is fair, dealing with debt collection, and making sure truth-in-lending laws are followed. Thirteen of these jobs need special teams, and those teams are now mostly gone or not working.
A legal fight quickly started after the layoff news. Federal Judge Amy Berman Jackson stepped in to stop the layoffs for a short time. She said that CFPB employees could not lose access to their government email or documents while the court case is happening. But the agency’s ability to work long-term is still uncertain. More court dates are coming, and lawmakers, consumer advocates, and people in the industry are worried about what will happen next.
Rules Are Changing Again
Under a new internal policy, the CFPB’s main goals are changing a lot. Checking on fair lending — something the CFPB used to focus on heavily — is getting less attention. Instead, the people in charge right now are putting more effort into certain areas of protecting consumers.
Specifically, the CFPB now says it will use its limited money to help military families, veterans, and other protected groups who face money problems. While this focus is kind and smart, it leaves out much of the mortgage market that affects regular people and those buying a home for the first time. Important tasks like giving official advice, looking into unfair lending, and checking risks based on data are now low on the agency’s list of things to do.
This narrow focus on enforcing rules brings up possible issues with the constitution, laws, and regulations. Colgate Selden, one of the first people to work at the CFPB and a well-known legal expert in federal rules, warns this change could create what he calls a “constitutional gray zone.” Selden warns that if the executive branch doesn’t focus on the jobs Congress gave the CFPB by law, “It could be a violation of the Constitution”.
Simply put: fewer federal people checking rules does not mean fewer rules. It just means you will be trying to figure them out without help.
What This Means for Mortgage Lenders
At first glance, less checking might seem like good news for lenders and servicers. But experts warn that less federal control often causes problems in the real world. Nanci Weissgold, a top lawyer for rules at Alston & Bird, tells businesses not to think this change means they can stop being careful. She thinks, “Now is not the time to go light on compliance.”
Why? Because without clear federal rules, figuring out what to do falls on each company. This lack of clear answers can make risks bigger. For example:
- Unclear rules about fees might lead to lawsuits from customers.
- Not having clear directions might mean different offices or areas follow different steps.
- States checking rules in different ways can make it easier to fail audits.
Smaller and mid-size nonbank lenders might be most at risk. They often don’t have big legal teams or people who check their own work inside the company. These companies now find themselves facing unclear rules without guidance.
As CFPB leaders show they will focus less on checking all lending, states are starting to step up to fill the gap. That sounds good in theory. But in reality, it makes following rules much harder.
State Regulators Step In—But It Costs Something
Before the CFPB was started by the Dodd-Frank Act in 2010, states were mostly in charge of mortgage rules. Now, we might be heading back to that system. Some states are already doing things, increasing how closely they check rules and making it harder for lenders to work.
For instance, some state regulators now think override compensation practices might be against the law. Overrides — where branch managers get paid based on all loans started in their office, even if they weren’t directly involved — used to be common in the industry. But recent actions show that at least one state now sees this as breaking loan officer pay rules.
This lack of consistent rules makes things hard for both work and legal reasons. A pay plan okayed by Nevada regulators might be flagged by California. And Utah could see the same rule in yet another way.
In the end, this growing mix of state mortgage rules risks creating exactly the kind of broken system the CFPB was made to fix. Lenders who do business in more than one state will face much higher costs for following rules and a confusing mess of different ways to understand things.
As Colgate Selden put it simply: “It’s not consistent and could cost a lot.”
“Careful Record-Keeping” Is the New Main Goal
Since unclear oversight is now the usual way things are, keeping good records is more than just a good idea — it’s your first way to protect yourself.
Michael Metz, Operations Manager at VIP Mortgage, suggests what he calls “careful record-keeping” because the rules are unclear. For each loan file, you should record talks with the borrower, loan details, proof of changes, fee information, and how complaints were handled. Do this not just for federal checks, but in case state regulators look into things and understand the same rules differently.
“States aren’t ready for this,” Metz said. He was talking about how local rule-making agencies don’t have enough staff or knowledge. “It won’t be one agency telling you what to do anymore. It’ll be fifty.”
The extra work needed to follow specific rules for each area could cost more than many companies expected. This is especially true for those who thought a smaller CFPB would mean less work with rules.
What to Focus on Right Now as a Mortgage Provider
Getting ready for rules being checked more at the state level means putting more effort into following rules before you have to. Mortgage providers should not stop being careful about rules. Instead, they should change what they focus on.
Here’s what you should do right now:
- Keep following the rules you have now, like Truth-in-Lending Act (TILA), RESPA, ECOA, and Dodd-Frank rules.
- Pay attention to things that affect customers directly, like how fast you answer complaints and how clearly you show fees.
- Watch for news about lending to veterans and protecting active-duty military. These will likely be key things the smaller CFPB focuses on.
- Keep up with new rules or law changes in states and at the federal level.
- Put money into training staff on rules to get ready for different legal ideas coming from state agencies.
Also, think about starting a group with people from different departments to watch how things work and find problems before they cause trouble.
What NOT to Focus on Right Now
While some things are getting more attention, others are currently less important — at least from the federal government.
Here’s where you can move resources for now:
- Complicated checks on fair lending risks may not get quick federal follow-up.
- Broad understandings of UDAP (Unfair, Deceptive, or Abusive Acts or Practices) laws are being reduced — but states can still cause problems here.
- Requests for official advice from the CFPB are not being handled quickly — so figuring out unclear rules yourself might be your only choice for now.
However, don’t think less checking means you can stop caring forever. Rules and priorities change. What’s not important today could become very important again under different leaders in the future.
What This Means for Real Estate in Las Vegas
Markets like Las Vegas — where companies other than banks do a big part of the lending — need to get ready for things to be less steady. The lack of consistent rules from the federal government, plus many people wanting to buy homes, makes things especially risky for lenders and agents.
Steve Hawks, a local real estate agent, says this confusion is like working without safety nets. “When rule-following gets weaker, customer risk goes up — and so does your own risk. You don’t want that when several people are offering to buy the same house,” he warned.
In difficult deals, not being sure about the rules causes problems. “If one lender follows federal rules and another follows state rules, deals get messier. The customers feel that,” Hawks said. This makes it very important for real estate agents to check lenders carefully, not just for how much they charge and how fast they are, but also for how well they follow the rules.
State-Specific Risks for Nevada Lenders
If you work in Nevada’s tough housing market, you face specific risks because federal oversight is changing:
- Problems with rules between Nevada and nearby states like California and Utah might slow down deals that involve more than one state.
- State staff who check rules might not have enough training or people, making audits slower and increasing the chance of sudden fines.
- The costs of more frequent state audits will probably go up.
- Because the federal government is checking less, Nevada officials are under pressure to quickly train and hire people who can understand the laws — this process has been confusing and unplanned so far.
To help with these issues, Nevada lenders should think about having specific people handle rules for deals outside the state. They should also join industry groups that work on rules and hire lawyers who know about how rules are enforced in the Western part of the country.
Getting Ready for the Next Phase of Rule Following
Here’s how you can stay ahead as rules change:
- Make sure your work can pass audits by keeping detailed records and proof of steps taken.
- Check and update your guidebooks to follow both federal and state laws that apply.
- Pick people to be in charge of following rules for each main state where you work.
- Make training and rule-following lists the same across all your offices so there are no differences from one area to another.
- Work with law firms and experts who know about the changing ways mortgage rules are set.
Whether you start mortgages, service them, or work as a broker, actively following rules will directly protect your customers, your deals, and your name.
Following Rules Helps You Compete Better
When the rules are changing, being honest is what makes you stand out most.
David Krebs, who runs operations at DAK Mortgage, thinks the current changes offer a good chance to show what your company is about. “Customers value honesty in a confusing market,” he said. “Now is the time to show that your company takes following rules seriously.”
Steve Hawks agrees, seeing it from working directly with clients in Las Vegas real estate. “When my clients pick lenders, we go with the ones who get things done cleanly and quickly,” he said. “Following rules builds trust — and trust helps you win offers.”
In markets where many people are trying to buy homes, having a good name isn’t just about advertising — it brings in money.
Don’t Get Too Relaxed
The main point? Following mortgage rules is still very important, even if the CFPB is smaller. Thinking that rules are less strict can be just that — a thought that isn’t true. Changes at the federal level don’t mean things are easier. They start different states checking rules in different ways, make laws unclear, and cause costs to go up.
Now is the time to make your plan for following rules stronger, not weaker.
Steve Hawks says it best: “In real estate, mistakes by the people you work with can cost your clients their deals. Being smart about following rules isn’t just annoying paperwork — it’s part of good service.”
As Nevada real estate gets ready for changes, let trusted professionals help you figure out what to do. Talk to Steve Hawks for a free check to see if you’re ready to follow rules, or ask for a list to help you prepare for audits.