2025 Mortgage Compliance Landscape Check-In: Where are We Now?
Jonas Hoerler is Chief Regulatory Counsel with RegCheck, Asurity’s loan compliance solution. Diane Jenkins is an attorney with Asurity and a partner at Sandler Law Group.
So far calendar year 2025 has brought with it some of the most significant changes to residential mortgage compliance the industry has seen in many years. Much of the federal activity eliminated policies the agencies considered “outdated,” reducing unnecessary compliance costs along with identified burdens on the mortgage industry.
In response to the changes in federal regulation and enforcement, several states have already expanded their own consumer protections with an eye toward ensuring their citizens remain safeguarded from financial harm and abusive practices.
In this article, we provide an overview of some of the most significant events that have shaped mortgage lending and servicing so far this year.
A Federal Retreat and State Ascendance
In early 2025, dramatic shifts at the federal level significantly transformed the mortgage compliance landscape. On February 1, 2025, the Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra was removed and replaced by acting leadership that quickly ordered a freeze on nearly all agency operations, including enforcement activities and rulemaking. Under the leadership of Acting Director Russell Vought, the CFPB has been and continues to be steadily reshaped, consistent with the President’s stated objective to downsize the federal government. Indeed, the CFPB headquarters was briefly closed, and by mid-February, staff reductions of up to 90 percent were proposed (though temporarily enjoined by judicial order). Among the most dramatic shifts in the pursuit of mortgage compliance enforcement activities have been the CFPB’s voluntary dismissal of a slate of ongoing lawsuits against large financial institutions just weeks after the new leadership took control of the agency.
With the CFPB’s reduced role in mortgage compliance, some states have moved quickly to fill the void. Several state attorneys general have committed to heightened enforcement under existing consumer protection laws. By way of example, Michigan’s Attorney General Dana Nessel reaffirmed her office’s active use of the Michigan Consumer Protection Act, signaling a willingness to pursue mortgage and finance firms where the federal agency has retreated. Similarly, the New York legislature recently passed the FAIR Business Practices Act, strengthening its consumer‑protection statute by explicitly banning “unfair” acts (not just “deceptive” ones), raising statutory fines, and empowering AG and city enforcement across jurisdictions.
Finally, other states with active regulators—including California via its Department of Financial Protection and Innovation—are expanding their investigations into mortgage origination and servicing to ensure fair practices. Although detailed enforcement data is uneven, the general trend is clear: states are leveraging homegrown consumer protection authorities to pursue abuses in areas where the CFPB previously would have brought such cases.
State Legislative Updates
Discount Points: States Move to Permit Bona Fide Charges with Safeguards
In response to the challenging interest rate environment and evolving borrower needs, some states have enacted legislation to formally recognize and regulate bona fide discount points. Pennsylvania and Iowa are among the states this year that have passed new laws explicitly permitting lenders to charge bona fide discount points, provided certain consumer protections and transparency requirements are met. These laws align with the broader intent of federal Truth in Lending Act (TILA) and Regulation Z provisions, which allow discount points to reduce the interest rate on a loan when paid voluntarily by the borrower—but also require such charges to be “bona fide,” meaning the discount actually results in a meaningful rate reduction and is not simply a way to inflate fees or circumvent compensation rules.
The Pennsylvania Act, for example, now allows discount points on certain subordinate lien loans which result in a bona fide reduction of the interest rate or time-price differential applicable to the mortgage. Iowa’s legislation goes a step further, allowing discount points on consumer loans, but only so long as the total points and fees do not exceed amounts specified in federal regulations. These legislative updates are significant not only because they allow lenders to charge discount points under clearer terms, but also because they reduce legal uncertainty for lenders and brokers operating in multiple jurisdictions. At the same time, compliance teams must ensure that lenders do not use discount points to disguise improper compensation or inflate fees in ways that would trigger high-cost loan thresholds or violate QM standards.
Washington Implements Foreclosure Prevention Fee Requirements
Effective July 27, 2025, the state of Washington began collecting a new “foreclosure prevention fee” as part of an expansion of the state’s Foreclosure Fairness Act. Following passage of Senate Bill 5686, a fee of $80 is now assessed on nearly all residential mortgage loans closed in Washington. The fee is designed to fund programs that provide housing counseling, legal assistance, mediation services, and foreclosure prevention outreach to struggling homeowners across the state.
The fee applies to first and second mortgage loans, including home equity loans and home equity lines of credit (HELOCs), so long as the loans are secured by residential real property located in Washington and are for personal, family, or household purposes. Reverse mortgages made to seniors aged 61 or older are exempt from the fee.
In addition to collecting the fee, lenders and settlement agents must also provide borrowers with a foreclosure prevention fee notice at or before closing. This notice explains the purpose of the fee and includes contact information for Washington’s foreclosure prevention hotline.
Federal Legislative Trends
Trigger Leads Bill Passes
The Homebuyers Privacy Protection Act of 2025, also known as the “Trigger Leads” bill, was signed by the President on September 5, 2025. Subject to limited exceptions, the legislation prohibits credit reporting agencies from selling a consumer’s information if a credit inquiry regarding a home mortgage loan triggers the provision of a consumer report.
Federal Agency Updates
VA Partial Claim Option Added
The VA Home Loan Program Reform Act expands the loss mitigation options available to help veterans experiencing financial distress by resurrecting the VA partial claim program.
Once the COVID-specific relief programs ended, there were no partial claim loss mitigation options available for VA loans. The Act provides VA borrowers with loss mitigation options similar to those available for FHA and USDA loans.
The Department of Veterans Affairs has not yet released a timeline for implementation or any guidelines for the partial claim program.
FHA Rescinds Multiple Policies
In late June, the FHA announced it was eliminating several policies and related requirements in an effort to “cut red tape, help reduce the cost of homeownership, and eliminate financial and regulatory burdens.” The FHA eliminated several policies introduced in 2024 by the previous administration’s “Property Appraisal and Valuation Equity” (PAVE) task force, which included the establishment of a borrower-initiated reconsideration of value (ROV) process. The now rescinded ROV process required lenders to establish policies and procedures for borrowers to request an ROV and disclose these procedures at application and again when the lender provided the appraisal to the borrower. The FHA rescinded the requirements around borrower-initiated ROVs in Mortgagee Letter 2025-08 as part of the new administration’s goal to “reduce unnecessary regulatory burden and foster long-term economic stability for all Americans.” Fannie Mae also published borrower-initiated reconsideration of value requirements in 2024, and while they no longer require the ROV disclosure to be provided to the borrower at application, the lender must still include it with the appraisal report.
In 2023, the FHA began requiring applications to be accompanied by the Supplemental Consumer Information Form (FNMA Form 1103), which collects information on homeownership education and counseling, as well as language preference. In Mortgagee Letter 2025-15, the FHA rescinded this requirement, stating that the form is of limited benefit and imposes an additional collection burden.
The FHA has historically required appraisal procedures that exceeded industry norms, making FHA appraisals more costly and time-consuming than standard appraisals. Several “antiquated and burdensome procedural steps” have been eliminated by the FHA in Mortgagee Letter 2025-18 to align its appraisal policies with industry standards and reduce unnecessary costs to borrowers.
In addition, the FHA announced in Mortgagee Letter 2025-12 that all COVID-specific loss mitigation requirements will sunset on September 30, 2025. The FHA will replace the temporary emergency loss mitigation policies with new permanent loss mitigation options, which take effect on October 1, 2025, ahead of the originally scheduled date of February 2, 2026. The Home Affordable Modification Program (HAMP) remains suspended until September 30, 2025, when it will permanently sunset.
Looking Ahead
To date, the 2025 mortgage compliance landscape has reflected a dynamic interplay between regulatory evolution, technological advancement, and market adaptation. As lenders navigate the CFPB’s shifting enforcement priorities, accompanied by ever increasing activity at the state level, proactive compliance strategies are more essential than ever. Staying ahead for the remainder of 2025 and beyond will require not only keeping pace with regulations but will necessitate embracing compliance as a strategic asset in an increasingly complex housing finance environment.
(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)
