The Consumer Financial Protection Bureau (CFPB), which is undergoing significant changes under the Trump administration, has rescinded 67 guidance documents issued since 2011, including several that affect the mortgage industry.
“Some of the withdrawn guidance was helpful to clarify regulations, which gave lenders certainty and could also be useful if defending against private litigation with plaintiff’s firms,” said Colgate Selden, a founding member of the CFPB and an attorney at SeldenLindeke LLP. “A lot of it also appears to not have much impact, such as the withdrawn items that have already self-expired.”
As an example, the CFPB issued a bulletin on loan originator compensation in 2012 while it was transitioning oversight from the Federal Reserve to its own jurisdiction. According to Selden, the bulletin “became ineffective as soon as the CFPB’s version of the LO Comp Rule” came into effect.
The CFPB’s decision follows a 2019 executive order signed by president Trump, which stated agencies should not create rights or obligations through guidance documents. Although the order was rescinded by President Biden, CFPB Acting Director Russell Vought argued that its principles are required by existing laws such as the Administrative Procedure Act.
According to Vought, the CFPB guidance has, in many instances, “adopted interpretations that are inconsistent with the statutory text and impose compliance burdens on regulated parties outside of the strictures of notice-and-comment rulemaking.”
The withdrawal of these documents is not necessarily final. While the CFPB will continue to review them, they should not be enforced in the meantime.
The memorandum covers guidance related to credit reporting, whistleblower protection, debt collection, and mortgages. Most of the documents on the list were issued during the Rohit Chopra era, with only three originating under former CFPB Director Kathy Kraninger.
The American Bankers Association, which represents the $24.1 trillion U.S. banking industry, welcomed the move.
“While banks welcome guidance that helps them understand and comply with the law, too often in the past the CFPB has characterized something as guidance that is actually a rule Congress requires to go through the notice-and-comment process,” said president and CEO Rob Nichols in a statement.
According to Nichols, the misuse of guidance documents to announce expectations beyond the CFPB’s statutory authority “creates unnecessary confusion for regulated entities, deprives the industry of fair notice and undermines the legitimacy of the regulatory process.”
In the mortgage space, the Mortgage Bankers Association (MBA) said it supported the CFPB’s April 11 memorandum announcing a comprehensive review and rescission process, sharing a compilation of existing policy statements, interpretative rules, advisory opinions, and other guidance materials that it believes should be retained with respect to the mortgage industry.
The MBA told HousingWire that “it appears that all those items were retained” but the trade group “is conducting a more exhaustive review of the announcement and will share its analysis when it’s ready.”
The MBA’s list includes topics such as policy statements on supervisory practices in disaster emergencies, interpretative rules on screeding and training requirements for loan officers, and bulletins on handling documents during mortgage servicing transfers, among others.
Selden said that for some of the withdrawals that may impact operations, “It may have been better to provide a date that it would be withdrawn too such as the 2014 interpretive rule on assumptions guidance involving surviving family members and the ATR Rule.”
According to Selden, some of the digital marketing – preferencing and steering practices by digital intermediaries for consumer financial products or services –, Reg. B and general supervisory items potentially cover mortgage as well.
“Hopefully all of this guidance will remain readily available on the CFPB’s website, if for example, there is litigation involving lender actions that were taken based on this written guidance at the time,” Selden added.
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