The materials available in this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your own advisors with questions regarding the mortgage regulation content herein. The opinions expressed in this article are the opinions of the individual authors and may not reflect the opinions of MeridianLink, Inc. The opinions expressed in this article are the opinions of the individual authors and may not reflect the opinions of MeridianLink, Inc.
Between shifting federal enforcement priorities and new state-level requirements, the mortgage lending industry is undergoing significant regulatory changes that require careful attention.
To help lenders stay on top of these developments, we sat down with Mitchell Sandler, PLC, Co-Managing Partner Daniella Casseres and Partner Alex Temple to unpack the most pressing trends and what they mean for everyday mortgage lending.
With backgrounds in areas including regulatory compliance, fair lending, mortgage regulation, litigation and enforcement, and fintech, they offered several key insights for lenders to consider in the new mortgage regulatory landscape.
Below are a few takeaways from the presentation.
Oversight & enforcement are increasingly moving to the state level
The federal regulatory landscape has undergone massive changes in the past year, among them priority shifts, narrower rules—such as the Consumer Financial Protection Bureau’s (CFPB) Regulation B amendment overhauling disparate-impact liability—and significant employee reductions within the CFPB, the Office of Fair Housing and Equal Opportunity, and the Department of Justice (DOJ).
This doesn’t mean federal regulatory oversight and enforcement are gone, but it does mean that state governments and private class action lawsuits are becoming increasingly popular avenues through which issues can be addressed, often guided by former federal personnel. A few examples of this shift playing out include:
- Rohit Chopra, previously the CFPB Director, who now advises state attorneys general on ways to supervise and examine consumer protections, in addition to serving as the Secretary of California’s new Business and Consumer Services Agency—created in response to federal changes.
- Eric Halperin, once the CFPB enforcement Director, who is now one of three CFPB alumni serving as senior fellows with the Protect Borrowers nonprofit.
- Gabriel O’Malley, the former CFPB Deputy Enforcement Driver, who currently serves on the Consumer Protection and Financial Enforcement Division of the New York State Department of Financial Services. New York also recently enhanced UDAAP authority through the FAIR Business Practices Act.
Staffed by experts with a federal background, the rising multistate regulatory coalition is pursuing, sometimes aggressively, enforcement and supervision. With this state-level shift come shifting risks—and often, heightened stakes—for mortgage lenders, as seen in several cases and settlements from 2025 to present.
Commonwealth of Pennsylvania, Office of Attorney General v. Bright Financial Group
In January 2025, the Pennsylvania Attorney General sued Bright Financial Group for a RESPA violation—notably, with no cash kickback involved—alleging that brokers were giving real estate agents discounted, non-voting stock in broker-owned entities, and that the agents were receiving quarterly distributions running over 900% of what those agents paid into the stocks.
The attorney general stacked claims based on the federal RESPA, the Federal Consumer Financial Protection Act, and Pennsylvania’s own Consumer Protections Statute to argue that while no cash exchanged hands, “a thing of value” as defined by the RESPA doesn’t have to be money. It can also be, such as in this case, equity. The Attorney General alleges that where referrals determine access to ownership interests or the returns paid on those interests, the arrangement may constitute a prohibited thing of value under RESPA Section 8.
Whether this outcome was due to states’ deepening knowledge of the federal RESPA or former federal employees bringing that knowledge to state attorney general and regulatory offices, it underscores the severity of states’ crackdowns on regulatory violations.
Maryland Attorney General settlement with KVS Title and joint venture companies
A similar case settled in January 2026 saw the Maryland Attorney General Office’s Consumer Protection Division invoke the federal RESPA, the Maryland Real Estate Settlements Act, and the Maryland Consumer Protection Act to allege that six joint venture companies formed by KVS Title, LLC, and real estate brokers and agents amounted to illegal referral payments dressed up as investments. Agents allegedly received discounted ownership stakes, which is a red line for affiliated business arrangements.
Lenders should particularly heed the outcomes of this agreement: On top of a fine and restitution, the settlement stipulated the dissolution of the six joint venture companies and barred KVS Title from forming new ones in the future. Especially in the face of individual state laws alongside federal laws, mortgage lending companies that even unintentionally create an arrangement like that of the title company risk serious consequences.
Massachusetts Attorney General settlement with Earnest Operations LLC AI changes
The Massachusetts Attorney General Office settled with Earnest Operations LLC, a student loan company, in July 2025 to resolve allegations that the company’s lending practices, including the use of AI models that could lead to discriminatory outcomes, violated several federal and state consumer protection and fair lending laws.
What does that have to do with mortgage lending? A lot, since the circumstances of the settlement could easily translate to mortgage lending scenarios. The takeaway here is that the allegations didn’t require AI-specific laws to be brought forward. Further, Earnest Operations’ claim that they used a pre-existing AI model created by a different company was not considered a permissible defense.
As mortgage lenders increasingly adopt AI models within their workflows, it’s crucial to monitor for potential discriminatory practices to avoid hefty penalties.
State enforcement and supervision trends to monitor
Alongside the headline lawsuits are the trends appearing in everyday proceedings, particularly:
Non-compliant advertising
This occurs when mortgage lenders advertise items like rates or loan terms without proper disclosures
Improper pre-approval letters
Pre-qualifications advertised as pre-approvals, despite no underwriting taking place, are being treated as deceptive practices.
Unlicensed activity
This is commonly showing up in three ways:
- Individuals dually employed as Realtors®, loan originators, or business development employees, leading to potential conflicts with RESPA’s carveout for paying employees fair market value for services actually rendered. It can also lead to UDAAP conflicts if dually employed individuals fail to disclose the nature of their relationship and the consumers’ right to choice.
- Unqualified employees having out-of-bounds discussions on rates and terms instead of ensuring proper ownership and handoff to licensed individuals.
Non-producing branch manager referrals in which real estate brokers hired within mortgage companies solicit lending business and misrepresent themselves as someone qualified to originate loans. This usually occurs due to a lack of awareness about licensing laws and qualifications. Here, it’s also imperative to ensure these managers act within fair market value based on the job description, otherwise there’s a risk of inadvertently funneling leads
Avoiding these liabilities requires, in a nutshell, communication, education, and clarity.
Define job functions from the outset and ensure employees have proper licenses. Educate on regulatory requirements pertinent to everyday interactions. Implement clear workflow practices and handoff procedures to keep operations compliant. Document services received and prices for those services. And always, always provide thorough disclosures to consumers.
Watch the webinar on demand for even more insights
It’s imperative for mortgage lenders to understand how expanding state-level regulatory enforcement can impact business. But that’s just one side of the coin. Learn more about the shifting regulatory landscape, including both state and private RESPA litigation development, and how to respond to these shifts in the on-demand webinar below.
