Mortgage Origination and Servicing

Looking Ahead to 2026

In 2025, the mortgage market saw federal enforcement efforts decrease as the Consumer Financial Protection Bureau (CFPB) shifted priorities away from subject areas like fair lending. The CFPB’s internal restructuring — marked by sweeping staff reductions and an April 2025 internal memo announcing new enforcement priorities — effectively paused large-scale supervisory activity. The CFPB also terminated or allowed mortgage-related consent orders to expire early, reduced litigation activity by transferring enforcement lawsuits to the U.S. Department of Justice (DOJ), and proposed limiting Regulation B to eliminate disparate-impact liability claims under the Equal Credit Opportunity Act (ECOA).

Looking ahead, enforcement activity in the mortgage space is expected to shift predominantly to state attorneys general and state-level financial regulators. Private litigation is also anticipated to increase, particularly in jurisdictions with borrower protection statutes. In this environment, mortgage originators and servicers should strengthen multistate compliance frameworks and, given the shifting focus of federal enforcement priorities, expect continued state-level activity targeting servicer conduct and fair lending compliance.

Key Trends From 2025

In 2025, Goodwin tracked 12 publicly announced enforcement actions related to mortgage origination and servicing (nine state and three federal), a decline from the 13 actions that Goodwin monitored in 2024 and the 14 actions tracked in 2023. Indeed, 2025 reflected the second fewest enforcement actions and the lowest annual recovery in the 10 years Goodwin has tracked such activity, continuing a decade-long downward trend.

Federal Regulatory Developments

Although the CFPB’s mortgage supervision efforts shifted the focus away from disparate impact in 2025, the CFPB continued to consider mortgages a high priority. During 2025, the CFPB:

• Announced shifting enforcement priorities in an April 2025 internal memo. According to the announcement, the CFPB’s focus will be on what the CFPB chief legal officer called “pressing threats to consumers, particularly service members and their families, and veterans.” The memo put mortgages as the highest priority item on the CFPB’s list. The memo also stated that the CFPB would not enforce disparate-impact discrimination but instead would focus on matters with “actual intentional racial discrimination and actual identified victims.” The April 2025 internal memo also stated that the CFPB intended to reduce supervisory exams and would not conduct exams when the CFPB’s authority overlaps with the states’ unless required by law. 
• Announced a regulatory agenda to undertake 24 rulemaking items, including a proposed rule to rescind the “discretionary compensation provisions” of the Truth in Lending Act (TILA) loan originator compensation requirements and plans to issue advance notices of proposed rulemaking relating to Regulation X and Regulation Z mortgage servicing rules, to determine whether the CFPB should amend those provisions. The CFPB also noted that it plans to finalize its mortgage servicing rule revisions that were previously proposed in July 2024. As a long-term action, the CFPB stated that it intended to address the ability to repay requirements applicable to mortgage loans via TILA.
• Terminated or allowed the early expiration of mortgage-related consent orders, including those against multiple mortgage lenders, such as Planet Home Lending citing “substantial compliance” with prior remedial requirements. The termination of these consent orders appears consistent with the CFPB’s April 2025 internal memo. 
• Proposed limiting Regulation B, the ECOA’s implementing rule, to change certain lending restrictions. The proposed changes would eliminate disparate-impact liability claims under the ECOA, narrow prohibitions on the “discouragement” of certain credit applicants, and restrict the use of “special purpose credit programs,” which offer favorable credit to historically underserved groups.

The Federal Housing Finance Agency (FHFA), meanwhile, rescinded an advisory bulletin directing Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation) to consider enforcing unfair or deceptive acts or practices (UDAP). In the FHFA order, Director William Pulte stated that the FHFA does not view the government-sponsored enterprises as regulators and that UDAP enforcement should remain within the exclusive purview of the Federal Trade Commission.

Similarly, the Office of the Comptroller of the Currency (OCC) published proposals that would simplify retention requirements for banks with less than $30 billion in assets and rescind what the office characterized as “duplicative” home loan data collection obligations. These changes, if finalized, would further ease compliance burdens for community and regional banks engaged in mortgage origination.

Vought-Led CFPB Changes Course Over Actions Brought by Preceding Administration

In February 2025, the Russell Vought–led CFPB dismissed with prejudice three outstanding mortgage-related enforcement lawsuits in federal court that it inherited from the prior administration. One of the cases, CFPB v. Vanderbilt Mortgage and Finance, Inc., was filed by the Rohit Chopra–led CFPB on January 6, 2025 — just days before the turnover to the new administration — and alleged that Vanderbilt Mortgage and Finance violated TILA and Regulation Z by originating “loans without making a reasonable, good-faith determination” of the consumers’ ability to repay them. The CFPB’s dismissal in the Vanderbilt case came prior to the defendant even answering the complaint.

Also in February 2025, the CFPB dismissed CFPB v. 1st Alliance Lending, LLC, a case that the CFPB originally brought in January 2021 alleging that the defendant, a Connecticut-based mortgage lender, used unlicensed employees to originate mortgages in violation of the TILA and Regulation Z and the company improperly denied credit applications without providing the proper “adverse action” notice under the ECOA and the Fair Credit Reporting Act. The parties’ summary judgment briefing was pending at the time of the stipulated dismissal.

Then in May 2025, the CFPB issued a no-action letter related to a January 2025 consent order against Draper and Kramer Mortgage Corporation, an Illinois-based non-depository mortgage lender. The CFPB alleged that Draper and Kramer violated the ECOA, Regulation B, and the Consumer Financial Protection Act (CFPA) by locating all of its offices in majority-white neighborhoods, avoiding marketing to majority-Black and Hispanic areas, and having an internal compliance program that was inadequate to prevent and monitor for redlining. The CFPB’s basis for the no-action letter was that Draper and Kramer had “already paid the civil money penalty” and stopped originating residential mortgage loans, which made continued monitoring unnecessary. The CFPB also noted that, consistent with the “Restoring Equality of Opportunity and Meritocracy” Executive Order, the CFPB “is focusing its supervisory and enforcement resources on fair lending matters with direct evidence of overt racial discrimination and identified victims, which were not present in this matter.”

In June 2025, the CFPB terminated its November 2023 consent order against Bank of America, relating to its compliance with the Home Mortgage Disclosure Act (HMDA) and implementation of Regulation C, two years early. The CFPB stated that the bank had fulfilled its obligations under the consent order by paying the civil money penalty, developing a compliance plan and annual report, and improving its HMDA compliance management system.

Court Denies CFPB’s Attempt to Vacate Settlement in Townstone

In June 2025, the U.S. District Court for the Northern District of Illinois denied the CFPB’s motion to vacate the settlement that it had reached with Townstone Financial in CFPB v. Townstone Financial, Inc., et al. The Townstone case was originally brought by the Chopra-led CFPB in July 2020 and alleged that Townstone violated the ECOA, including Regulation B’s discouragement provision, and the CFPA by illegally avoiding lending in Black neighborhoods in Chicago by, among other things, producing a radio show that allegedly openly disparaged the neighborhoods. The CFPB and Townstone settled in November 2024 for $105,000. However, after the change in administration, the CFPB filed a motion to vacate the settlement in March 2025, claiming that the entire Townstone case was “a flagrant misuse of government resources to destroy a small business that did nothing wrong.” The District Court’s order denying the motion described the request as “unprecedented” and stated that “granting the Motion would erode public confidence in the finality of judgments.”

New York Appeals Court Holds Foreclosure Abuse Prevention Act Applies Retroactively

As Goodwin previewed in our 2024 year in review for mortgage origination and servicing, litigation over New York’s Foreclosure Abuse Prevention Act (FAPA), which changed how the limitations period for mortgage foreclosure actions starts and stops, finally reached the New York State Court of Appeals. In Article 13 LLC v. Ponce de Leon Federal Bank, the Court of Appeals (i) held that FAPA should be applied retroactively and (ii) rejected certain constitutional challenges to parts of the law when applied retroactively. The court did not opine, however, on all parts of the multipronged FAPA. Because of the continued uncertainty, we expect FAPA litigation to continue into 2026. Indeed, a putative class action against the state, its governor, and the sponsoring legislator, alleging that the new law’s retroactivity unfairly extinguishes vested mortgage rights, was in its initial stages as 2025 came to an end.

Zombie Mortgages

This year brought renewed attention to “zombie” second mortgages, so called because they remain attached to a property but sit unenforced — often for years — even though they are in default. In June 2025, Connecticut enacted a 10-year statute of limitations for foreclosing defaulted junior mortgages, and New York and California considered similar bills. These measures reflect growing state interest in protecting borrowers from the surprise of long-dormant debt.

In a letter to the Office of Mortgage Settlement Oversight, Sen. Elizabeth Warren (D-MA), the ranking member of the Senate Banking, Housing, and Urban Affairs Committee, requested records concerning whether banks sold mortgages to third-party debt collectors that should have been extinguished under federal settlement agreements. According to Warren’s letter, “recent reporting indicates that some of these second mortgages may not have been extinguished after all.” Warren’s letter requested a response by January 7, 2026. As of writing this, there has been no report on what documents (if any) the Office of Mortgage Settlement Oversight provided.

New York Updates GBL Section 349 to Target “Unfair” Practices

In December 2025, New York Governor Kathy Hochul signed the Fostering Affordability and Integrity through Reasonable (FAIR) Business Practices Act into law. The FAIR Business Practices Act updated New York’s General Business Law (GBL) section 349 to include coverage of “unfair” acts in addition to the already prohibited “deceptive” acts. In a press release announcing the FAIR Business Practices Act’s passage, NY Attorney General Letitia James highlighted the FAIR Business Practices Act’s potential use against “mortgage servicers charging unnecessary high fees [and] debt collectors stealing Social Security benefits.”

2025 Enforcement Highlights

Massachusetts Attorney General Settles Foreclosure Prevention Suit

The Massachusetts attorney general entered a $2 million settlement with Cypress Loan Servicing LLC, a Texas-based mortgage loan servicer, resolving allegations concerning excessive debt collection calls, deficient debt validation notices, and delayed loss mitigation. The Massachusetts attorney general alleged that the servicer violated Massachusetts’ foreclosure prevention laws by requiring “consumers to pay large upfront down payments that were not subject to an affordability analysis,” as required by the law, and making “unlawful debt collection calls” in excess of the Massachusetts’ two-calls-per-week limit.

California DFPI Settles Overcharge Allegations

The California Department of Financial Protection and Innovation (DFPI) reached a $1.8 million settlement with a mortgage lender and servicer to resolve allegations that it violated state financial regulations. The DFPI alleged that the company “failed to establish a custodial account” for borrowers’ trust funds, “failed to reconcile its escrow liability ledgers,” and “overcharged [thousands of] borrowers per diem interest” in violation of the California Residential Mortgage Lending Act and the California Financing Law.

DOJ Secures Settlement With Non-Depository Mortgage Company Over Redlining Claims

In July 2025, the CFPB announced the termination of its October 2024 consent order with Vystar, a Florida-based credit union, in which the credit union agreed to pay a $1.5 million civil money penalty and committed to a series of remedial actions. The DOJ opened the investigation after receiving a referral from the CFPB, and this settlement marks the DOJ’s 16th under its Combatting Redlining Initiative.

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Read the next chapter, “Fintech.”