As oversight moves to states, brokers deal with a federal void
One of the biggest stories in the mortgage world in 2025 was the gutting of the Consumer Financial Protection Bureau (CFPB). The organization, which for years has provided oversight and regulatory enforcement for the mortgage industry, has nearly vanished.
This has pushed oversight and regulatory enforcement back to the state level. While many brokerages have reported the shift as largely smooth, others have struggled with the change.
Smaller brokerages with more limited resources now have to deal with states that are providing their own interpretations of long-standing federal guidelines.
Peter Idziak (pictured top), a senior associate and mortgage attorney at Polunsky Beitel Green, said some of those states have even begun passing laws that would have been largely unnecessary with the CFPB still in place.
“I definitely think just in the industry as a whole, as we've seen the CFPB step back from both supervision and enforcement, that you've seen states step up, and that's occurred in a couple of different ways,” Idziak told Mortgage Professional America. “One, you've seen more active state regulators and state AGs either enforcing existing state laws or federal consumer protection laws, because they are able to enforce a lot of those under Dodd-Frank.
“You've also seen states themselves start passing legislation in areas that maybe in the past, they were a little less interested in, because there was a feeling that you had a federal regulator that was enforcing a federal standard.”
Nobody to call
When federal regulators were enforcing a federal standard, if there were any questions at the state level, they would just pick up the phone and call the CFPB. Idziak said he’s heard that’s no longer an option.
“In the past, and I've heard this from more than one regulator, if they're looking to a federal rule, like a CFPB rule, they'll call up the CFPB and ask them how they interpret it,” Idziak said. “And one regulator told me, ‘It's their role. I'm going to follow their interpretation.’ But if there's no one to call anymore, this is where you get regulators, because the CFPB isn't responding, now they feel they have more freedom. They’re creating or interpreting rules in their own way.”
This has trickled down to small brokerages as well, and Idziak believes they’re bearing the brunt more than larger mortgage originators or lenders.
“I think small brokerages face a disproportionate impact from more active state investigations,” he said. “States occasionally will partner with each other, and they are trying to be better about that. But in the past, you might just have to respond to one audit or one examination at the federal level. Now you're handling multiple, and there's no easy fix to that, unfortunately, for small brokerages.
Help for small brokerages
As states continue to expand their authority in the new year, small brokerages can start to feel helpless. Idziak encourages brokers who are struggling with this to try to build a relationship directly with their regulator or an outside law firm that can help build that relationship on their behalf.
“One piece of advice is, to the extent that you feel comfortable, to maintain a relationship with your regulator,” he said. “Because, for the most part, they do want to help you comply with the various state laws. So, proactively reaching out to the regulators directly is one option. Or you can use an outside law firm to inquire, on a blind basis, about an interpretation of a state law.
“We are seeing a little bit of an uptick in requests for that at the state level than you might have in the past, because the CFPB did have a portal where you could submit questions and they could respond directly at the state level. It's a little bit harder sometimes to figure out who you need to contact in order to get a response.”
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— Mortgage Professional America Magazine (@MPAMagazineUS) December 15, 2025
Idziak said your outside compliance vendor can also help with challenges at the state level. Because one thing you obviously can’t do is ignore the state and hope it goes away.
“Look to the outside compliance vendor that you might be using or the outside law firm that you might be using, and ask them, ‘What are your relationships with state regulators and state attorneys general?’” Idziak said. “That’s where they can really leverage their contacts and expertise to help you stay compliant. Unfortunately, it's not something you can ignore if it comes up. So if the state comes, you are obligated at some level to respond.”
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