It was not too long ago that real estate professionals’ most pressing regulatory concerns stemmed from actions taken by the Consumer Financial Protection Bureau (CFPB). However, under the Trump administration, the bureau looks very different operationally.
The first half of this year included a series of major announcements about plans to slash the CFPB’s staff, budget, certain rules and its enforcement and supervisory activities.
Many of these plans have come to fruition while others remain in legal limbo.
The real estate industry is used to operating under a certain amount of uncertainty with respect to regulatory policies, given the frequency with which federal regulators issue new rules and guidance. But the bureau’s precarious state has taken this uncertainty to a new level.
Dodd Frank Update sought insight from a pair of former CFPB senior counsels about what mortgage lenders and servicers can make of the current state of the bureau and how industry professionals should approach their compliance obligations moving forward.
Perpetual policy ping-pong
In grand scheme of things, Richard Horn, co-managing partner at Garris Horn LLP, views the dramatic shift in CFPB activity under President Donald Trump as essentially just the latest swing in the constant back-and-forth that has become the norm with every change in political leadership.
With that in mind, he cautioned companies not to let up on the gas in terms of compliance activities just because the CFPB has done so in terms of supervision and enforcement.
“This regulatory pendulum has been swinging more drastically every administration,” Horn said. “It’s basically going to be like a ping-pong match from now on with the different administrations not accepting the other’s rules and rescinding them. Then the next administration will do the opposite.”
5 Aside from the regulations nullified via the Congressional Review Act (CRA), there are plenty of rules and guidance materials the CFPB has withdrawn that could easily be put back into place the next time the political pendulum swings to the left.
“The proposed and final rules don’t magically disappear forever, just because the current administration withdraws or rescinds them. The same goes for withdrawn guidance,” he said. “I think the industry can expect the next Democratic leadership to quickly move on republishing withdrawn guidance and undertaking these rulemakings again pretty quickly to avoid a CRA disapproval.”
And should a Republican administration come back in power after that, Horn said he believes it is highly probable those same policies would once again be on the table to be withdrawn again.
“Unfortunately, it looks like the industry should start to expect the new normal to be regulatory whiplash,” he concluded.
David Friend, owner of Friend Mortgage Consulting, said the industry would be wise to recognize the swinging pendulum pattern that has emerged since the CFPB’s inception.
“The CFPB seems to be pulling back in general, but it would be a mistake to think that this reflects a complete pullback,” Friend said. “Some of the signals of the new administration could put mortgage companies in the future crosshairs. That, coupled with state-level enforcement and the legal challenges against the Trump administration, suggests that continued vigilance in compliance is warranted based on existing requirements.”
What would a more ‘moderate’ CFPB look like?
If there has ever been a glimpse of what a relatively moderate CFPB might look like, Horn would say it was under former Director Kathy Kraninger.
Although Kraninger drew the ire of Democrats with her decision to withdraw a provision for the bureau’s payday lending rule that required payday lenders to determine a borrower’s ability to repay, Horn contended the bureau’s enforcement division operated at a similar clip under her leadership compared with former Director Richard Cordray.
The key difference was that Kraninger’s CFPB focused most of its enforcement efforts on smaller entities, rather than the largest players in the financial ecosystem.
“Hopefully this pendulum loses the steam over time and we have some more moderation on both sides of these actions and viewpoints,” Horn said. “Maybe they can eventually start to accept that some of what the other administration had done might have actually been correct.”
As it stands, there is little common ground between the two sides of the political aisle with respect to the bureau.
Horn acknowledged there has been significant discussion about the need to improve the bureau’s civil investigative demands (CID) process. If both sides were serious about wanting to simply improve the CFPB, rather than remaking it in their own image every four years, this could be a good place to start, he said.
During a recent House Financial Services hearing titled “From Watchdog to Attack Dog: Examining Chopra’s Assault on Disfavored Industries,” the topic of CIDs raised lively debate about common company complaints regarding the apparent lack of clarity and transparency involved with the process.
However, Friend noted he has not seen “any substantive proposals that would do anything other than to add standards for courts to reduce or quash CIDs that will increase attorney’s fees for financial institutions with additional litigation around what constitutes an ‘unduly burdensome’ or ‘unreasonable’ request; and if unsuccessful, will still require compliance with a CID.”
An early version of the bureau’s data privacy rule, implementing provisions of Sec. 1033 of the Dodd-Frank Act, drew praise from prominent Republicans and financial services industry leaders. However, the bureau’s failure to address industry concerns about the rule’s third-party risk protections and other perceived weaknesses in the finalized version led to a loss of bipartisan support for the rule.
“The current state of the case is in the summary judgment phase, with the CFPB seeking to have the rule voided by the court under an argument that the rule was arbitrary and capricious, and the Financial Technology Association seeking to save the rule,” Friend explained.
The data privacy rule is considered pivotal to the long-term future of open banking in the U.S.
Actions speak louder than words
Predicting how the CFPB will operate moving forward is particularly challenging when considering instances where its actions have not seemed to be in alignment with its stated intentions. Friend highlighted one recently withdrawn consent order as an example.
“It’s hard right now to get a full sense of how the bureau is going to operate in the future – the cliche is that words are cheap, so focus on the actions,” Friend said. “For example, there have been releases and statements from the acting director about emphasizing compliance for companies providing financial services to servicemembers, but then terminating a consent agreement with Navy Federal with minimal recovery made to servicemembers due under the agreement.”
To this point, he is particularly interested to see how the CFPB handles its next rule proposals and rescissions before setting his own expectations for what is to come.
“Again, I’m watching and absorbing actions more than statements,” Friend said. “Right now, I’m waiting on a couple of proposed rules to be released after Office of Personnel Management review.”
The anticipated recission of the CFPB’s Loan Originator Compensation rule and its rules regarding the discretionary mortgage servicing provisions of Truth in Lending Act (TILA) and RESPA are among the moves Friend is most interested in seeing play out.
“It will be interesting to see what is proposed and how it is presented in the proposed rule,” he said. “Both seem like it’s early compared to normal processes that would base the rulemaking on an economic analysis of any proposal.”
Based on what the industry has seen throughout the past several administration changes and from the current one to this point, the best defense against the regulatory shifts stemming from turbulence at the CFPB is to maintain strong compliance staffing and stay on top of the ever-swinging political pendulum.
This article was included in the 2025 Real Estate Compliance Outlook in-depth report, with insight from experts across the real estate transaction about what compliance concerns should remain top of mind amid the changing landscape.