Even as Federal enforcement wanes, states are picking up the slack again
Federal downsizing has many mortgage professionals questioning whether the new-look Consumer Financial Protection Bureau (CFPB) will be staffed to continue stringent oversight of the mortgage industry.
A recent court ruling opened the door for the downsizing of the CFPB to resume. Part of this plan involves turning regulatory enforcement back over to the states. And one industry expert says that is something that every broker and mortgage professional should heed.
Daniella Casseres (pictured top), partner and head of the mortgage regulatory practice group at Mitchell Sandler, noted that state regulatory issues may have been more frequently overlooked compared to CFPB updates for many years. She told mortgage professionals in attendance at the National Association of Minority Mortgage Bankers of America (NAMMBA) Connect event on Thursday that this needs to change.
“I do think one area where people have maybe not paid as much attention to in the past few years that they should be paying attention to is state regulatory issues,” Casseres said. “Because they are enforcing more, they're implementing new laws that give them more enforcement teeth, similar to what the CFPB had. I'm seeing just a lot more investigations and power behind the states.”
Getting regular updates
Casseres encouraged brokers and loan originators to have a source to receive regular updates on both state and federal regulations and law changes.
“Our firm does a monthly regulatory update that is in plain English for mortgage originators,” she said. “What do you need to know from state and federal, and the state updates over the course of the past six months or so. They're updates that are not something your technology for compliance is going to catch, like you change the high-cost test.”
Mortgage brokers may face shifting oversight as the CFPB downsizes under new funding caps. Polunsky Beitel Green's Peter Idziak says state regulators and AGs could take the lead, but enforcement remains in effect. https://t.co/PSML61SNJK
— Mortgage Professional America Magazine (@MPAMagazineUS) July 11, 2025
She notes that the changes listed in these types of updates are often major changes. For brokerages that lend in multiple states, these updates are critical information to make sure they stay compliant.
“For a state, there are things that change your lending practices,” Casseres said. “They change how you need to implement oversight of your company to do certain risk assessments, and that could affect how you market and how you lend. I think one area where lenders need to pay more attention is those monthly updates from states that previously weren't as important to lenders, but I think they will become more important now.”
Combating redlining
Another issue Casseres mentioned was how new technology and artificial intelligence can help lenders and brokers combat the practice of redlining, or where home loans were denied to residents of neighborhoods deemed high risk, typically based on race.
She noted that not only can this data keep you compliant, but it can also provide valuable insights into your market.
“I think it goes back to understanding data right, and understanding what your data tells you, not just for redlining issues, but also just to penetrate the market better and help build your business,” she said. “The expectation from regulators is that, because you have access to this information … that you are really looking at it, slicing and dicing it, and making sure that you're proactive about implementing some sort of compliance management system to combat redlining.”
Casseres said she has seen states begin investigating issues like redlining. She emphasized the importance of proactively addressing any necessary changes to ensure fair lending practices, based on the data.
“And even if, from a federal enforcement perspective, perhaps initiatives have or priorities have shifted, there are still states that are looking at this,” Casseres said. “I've also had, recently, a lot of state housing coalitions that have launched investigations on some of our lenders. It's still something to keep a really close eye on.
“Even if it's not from a ‘Federal enforcement is coming in to get you’ perspective, it's really a sales tool. Looking at your redlining data by geography is still going to be super important, and it can be a great recruiting tool as well. I've seen lenders use it in a variety of ways that help them produce more and recruit better.”
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