One New Jersey attorney says the days of impunity for mortgage bad actors ended in 2010 — and he's proving it one case at a time
For the past year, mortgage brokers, lenders, and attorneys have issued warnings about what they’re seeing in the mortgage industry.
Whether it is the National Private Lenders Association (NPLA) creating a watch list to remove bad actors from the private lending space, or non-QM lenders warning about fly-by-night providers looking to make a quick buck, there is a growing concern that bad actors are gaining influence in the industry.
In addition, with the Consumer Financial Protection Bureau significantly reduced in size and scope, the guardrails on industry conduct are thinner than they have been since before the 2008 crisis. Brokers who play by the rules now have to worry about those who are willing to do a deal at any cost, even if it ends up hurting the end consumer.
One New Jersey consumer protection attorney who has spent more than thirty years practicing foreclosure defense and financial consumer rights says the concern is well-founded, and he is building cases rather than waiting for a regulator to respond.
Joshua Denbeaux (pictured top), a partner at Denbeaux & Denbeaux in Westwood, New Jersey, noted a civil complaint recently filed by his office in the Superior Court of New Jersey, Ocean County (Docket No. OCN-L-1805-26, filed June 17, 2026).
The complaint alleges fraud in the inducement, violation of the federal Ability to Repay rule under 15 U.S.C. 1639c(a), and violation of the New Jersey Consumer Fraud Act, with allegations including a loan placed with a lender not licensed in New Jersey, a monthly payment that consumed nearly the household's entire take-home income, and a written promise of refinancing within a year that the complaint says had no basis.
The case has not gone to trial yet, and no judgment has been made against any company or individual. Mortgage Professional America reached out to the parties involved and will include any comments received.
Denbeaux said he has seen a noticeable rise in cases where borrowers were placed into loans that should have appeared unaffordable from the day they closed, and he said the current regulatory climate is one reason more of these cases are occurring.
"The culture of business, the culture of government in the United States is in favor of deregulation and fraud," Denbeaux told Mortgage Professional America.
The CFPB gap and who fills it
Denbeaux said enforcement in the mortgage market operates at two distinct levels, and individual broker accountability has always lived at the state and licensing level rather than with the CFPB. When the Trump administration reduced the CFPB's capacity and dropped an existing settlement involving thousands of borrowers, the strategic immunity that large players had been cautious about effectively returned, he said.
"With the CFPB disappearing, I think that we have strategic potential for industry leaders to cut corners and cheat with impunity," he said.
That immunity does not extend to the individual and state level, where Denbeaux operates. State unfair and deceptive acts and practices statutes, attorney general complaints, and licensing authorities remain active enforcement channels, and New Jersey's treble damages provision means a case involving a loan's total cost of credit can produce a damages demand well into six figures before penalties are applied.
If brokers who are playing by the rules want to understand why certain competitors seem to be winning deals they should not be winning, this is part of the answer, Denbeaux said.
"If you choose not to do that, maybe you make more money for a little time until you run into me and then you're going to take a bath," he said.
What brokers can do
Denbeaux said the case he filed reflects a pattern he associates with newer entrants to the industry who did not experience what happened to originators after 2008, when post-crisis regulatory changes created real legal exposure for the first time and gave the generation that lived through it institutional memory their successors lack.
"There is a systematic failure of training, of oversight, of caring as to whether you're doing the right thing for customers," he said.
For brokers watching a competitor close deals that should not be closeable, Denbeaux said the options include reporting concerns to the state's mortgage licensing authority, filing a complaint with the state attorney general, or reaching out confidentially to the borrower directly.
"Someone can email the customer and say, 'Hey, this is wrong. This is not how it should happen. I don't want you to know who I am, but you need to hire an attorney,'" he said. "Criminal and regulatory complaints are confidential."
The situation is particularly frustrating for brokers trying to compete honestly, because when a bad actor can promise terms a compliant originator cannot deliver, good brokers lose deals they should win.
For those worried that the bad actors might get away with it, Denbeaux said the legal tools to hold bad actors accountable exist and he intends to use them.
"Those days of impunity and immunity are in the past," he said. "In 2010, those days were over."
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