Overcoming the Fear of AI

QUESTION 

This is not an easy question for me to ask. I have a prominent position in my company and community. The company originates mortgage loans in almost all the states. Our employees have written a petition requesting a slowdown in our plans to implement artificial intelligence. The petition has been leaked to the local news outlet, and it is causing a stir among our customers – and not in a good way. 

I can't say I disagree with the staff. I'm also worried. But we also have to keep pace with industry standards, which are moving toward AI. There are many known-knowns, but even more unknown-unknowns. People are losing their jobs to AI bots. It seems to me we are in the early stages of a full-blown unemployment crisis caused by AI. 

So, I will admit. I am afraid of what is happening and what is going to come. You have written a lot about AI in our mortgage industry. I want your advice on overcoming my fear of AI. I believe I speak for many people when I admit that I am worried about where we are heading. I know you're not a psychologist. I've been reading you for many years, and you've always offered sober counsel. I want to distribute your response to our staff. 

How can we overcome the fear of AI? 

SOLUTION

We recommend:

AI POLICY PROGRAM FOR MORTGAGE BANKING

AI FOR MORTGAGE LOAN ORIGINATION

RESPONSE 

Thank you for your question. Too often we push away our fears, denying them rather than admitting them. AI represents far more than an economic revolution. It poses challenges in many areas of human activity. That suggests there is not just a single fear of AI but many. 

You may want to read some of the articles I have written about AI. Click Here. 

I am going to offer a few antidotes to address some of those AI-related fears. 

FIRST: Name the exact fear 

The first thing to do is name the exact fear. When you bunch together conceptual categories like known-knowns and unknown-unknowns, you create a colossal stressor that embeds itself in your mindset. 

To make it easier for you to contemplate, I am going to provide an outline of certain types of fears. One or more of them may resonate with you. I will return to the importance of naming the fear later on. 

"Fear of AI" is really an umbrella for several distinct fears, and they call for different responses:

 

• Economic fear — "it'll take my job or devalue my skills" 

• Control fear — "it'll make decisions about me I can't see or challenge" (hiring algorithms, insurance pricing, content moderation) 

• Epistemic fear — "I won't be able to tell what's real" (deepfakes, AI-written text, and misinformation) 

• Existential fear — "it could become powerful enough to act against human interests" 

• Identity fear — "if a machine can write/paint/code, what's special about me doing it?" 

• Pace fear — not about AI specifically, but about how fast everything is changing and feeling like you can't keep up 

Once you know which one (or more) you're actually carrying, you can look for information and actions that speak to that fear specifically, instead of feeling generally unsettled by "AI" as a monolith. 

SECOND: Get direct experience 

Fear feeds on abstraction. The fastest way to shrink it is contact with the actual thing:

 

• Use a tool for something trivial and watch it get things right and wrong. 

• Deliberately try to make it fail. Ask it something it can't know, or something tricky, and see it hedge, get confused, or make an error. This is clarifying: it shows you're dealing with a fallible tool, not an omniscient force. 

• If your fear is job-related, look at how people in your actual field use these tools day to day, rather than trend pieces about "AI replacing X industry." 

Concrete, small-scale experience tends to replace catastrophic imagination with a more boring, accurate picture. 

THIRD: Understand the basic mechanics 

You don't need to code anything, just enough of a mental model to demystify it:

AI for Mortgage Loan Origination - New Manual

Introducing AI For Mortgage Origination! 

A Practical Manual for Growing Sales with Artificial Intelligence

We have received many requests for a manual that combines AI with sales and compliance. So we have created the "first in class" AI for Mortgage Loan Origination, a practical manual for growing sales with artificial intelligence, specifically meant for loan officers, branch managers, and sales leaders. 

 

This manual is a working guide for loan officers, branch managers, and sales leaders who want to use artificial intelligence to originate more mortgage loans without adding headcount or sacrificing compliance. It is organized around the loan officer's day-to-day workflow — finding borrowers, engaging them, moving files through processing, and closing — and shows where AI tools genuinely save time or lift conversion, and where a human still has to do the work. 

AI does not replace relationship-based selling in mortgage. It removes the repetitive, low-value tasks — data entry, first-draft content, routine follow-up, initial document review — so originators can spend more of their time on the calls and conversations that actually close loans.

HOW TO USE THIS MANUAL

Each chapter ends with an action checklist. Work through the manual in order the first time; after that, use it as a reference — jump to the chapter that matches the bottleneck in your pipeline this month.

THE APPROACH - FIVE POINTS IN YOUR FUNNEL

1 

Prospect Find likely borrowers in public & licensed data

2 

Engage Personalized outreach & 24/7 chat

3 

Qualify Conversational pre-qual & income checks

4 

Process Document classification & data extraction

5 

Retain Refi alerts & rate-lock triggers

WHAT' S INSIDE — 9 CHAPTERS + APPENDICES

GET A COPY

1 The AI Landscape for Loan Originators

        Where AI fits in the funnel, and what it still can't do.

2 AI-Powered Prospecting

        Predictive scoring and a compliant outreach workflow.

3 Lead Nurturing and Follow-Up

        Trigger sequences, rate alerts, conversational chatbots.

4 AI-Generated Marketing Content

        A repeatable brief-draft-edit workflow that clears compliance.

5 Pre-Qualification & Application Support

        Conversational intake and document intelligence.

6 Call Intelligence & Sales Coaching

        Turning sales calls into a shared coaching playbook.

7 Compliance, Risk & Fair Lending

        ECOA, FCRA, Reg Z, RESPA, UDAAP, 

        and a governance checklist.

 

8 Implementation Roadmap

        A 90-day rollout plan with clear team roles.

9 Measuring ROI

        The metrics that matter, and how to baseline them.

Most AI advice for loan officers is either a feature list with no compliance grounding, or a compliance memo with no growth

plan. 

This Manual is both — a chaptered, action-checklist playbook that follows your actual funnel from first contact to lifetime retention, with every recommendation according with Lenders Compliance Group's compliance standards.

GET A COPY

How to Prepare for a Global Recession

YOUR COMPLIANCE QUESTION 

YouTube

I am the CFO of a Mortgage REIT, a residential mortgage lender, and a mortgage servicer. Our board met to discuss what could happen to our mortgage originations in the event of a global recession. Our secondary and capital markets department is already gearing up for a recession. Our loan originations were affected by rising rates – and not in a good way. Our margins have been compressed, and hedging is difficult. 

Your name came up in the meeting, as one of the board members knows you. The thought was that you have many clients and probably have a good idea about the overall condition of the mortgage banking industry and how it can prepare for a recession. Because of your place in compliance and risk management, she feels that you could shed light on how we can prepare for a recession. Thank you for considering our question! 

How can a mortgage lender protect itself in a global recession? 

OUR COMPLIANCE SOLUTION

AI POLICY PROGRAM FOR MORTGAGE BANKING™  

Our AI Policy Program aligns with Freddie Mac's AI governance requirements for Freddie Mac Sellers/Servicers. Responsible AI practices can help align AI system design, development, and use with applicable legal and regulatory guidelines. 

Our AI Policy Program consists of the following policies:  

1.      Artificial Intelligence Governance Policy

2.      Artificial Intelligence Use Policy

3.      Artificial Intelligence Workplace Policy

4.      Artificial Intelligence Credit Underwriting Policy

5.      Artificial Intelligence Do & Do Not Policy

6.      Artificial Intelligence Ethics Policy

7.      Artificial Intelligence Vendor Management Policy  

Contact us for the presentation and pricing!  

RESPONSE TO YOUR QUESTION 

Our clients often discuss how their compliance failures result in direct financial losses. During a period of financial stress, a lender scrambling to address compliance deficiencies while also managing credit losses and liquidity pressures faces a compounded crisis that can accelerate failure. In this article, I want to address your specific question about what happens in mortgage banking in a global recession and how to prepare for it. 

Compliance Amplifies Everything 

Let me state at the outset that compliance during a recession amplifies everything! Specifically, in a recession, the compliance-stability connection intensifies because: 

• Regulators increase examination frequency and scrutiny, 
• GSEs conduct more aggressive post-purchase file reviews, 
• Borrower complaints rise sharply, triggering CFPB investigations, 
• Desperate borrowers and originators increase fraud risk, making compliance controls more critical, 
• Investors have less tolerance for defects and push repurchases more aggressively, and 
• State attorneys general become more active in mortgage enforcement. 

A lender entering a recession with a strong compliance foundation is dramatically better positioned than one carrying hidden violations that regulators and investors are about to discover. 

Fundamental Rule 

Here's the fundamental rule to planning for a recession: 

Lenders who prepare during good times survive recessions;

lenders who assume good times last forever do not. 

The 2008 crisis wiped out hundreds of mortgage companies that were profitable just 18 months earlier. The ones that survived – and thrived afterward – had built conservative balance sheets, diversified channels, and operational flexibility long before the storm arrived. 

Let's zoom out to the implications of a worldwide recession on mortgage banking. Understanding its impact on the banking ecosystem will give us a perspective on how a lender can protect itself in a recession.

Staying Ahead of Regulatory Changes

YOUR QUESTION 

We are a small broker in the West. There are only four people in our company. We are licensed in three states. Every year, we get slammed with new compliance requirements from state and federal agencies. It's too much! Sometimes I think compliance is first and sales are second. Every year it gets worse and worse. 

Surely there is a way to keep track of these regulations without spending a ton of money on search engines and lawyers. I don't know what I don't know, and that is the problem. You don't have to give me every chapter and verse about what to do. I just need some advice on what I can do, given my limited means and staff. 

I need to get back to sales, but too much of my day is consumed by compliance. 

So, please let me know how to stay ahead of changing regulations. 

A Frustrated Broker 

OUR COMPLIANCE SOLUTION 

We recommend: 

BROKERS COMPLIANCE GROUP, the first full-service, mortgage risk management firm in the United States, specializing exclusively in outsourced mortgage compliance and offering a full suite of services to mortgage brokers, mini-correspondents, and independent mortgage professionals. 

OUR ANSWER 

I understand how you feel. It's the main reason why I started Lenders Compliance Group twenty years ago. 

Our Brokers Compliance Group supports the unique compliance needs of mortgage brokers. We have hundreds of brokers who let us handle their compliance so they can focus on sales and operations. 

Let me say this: there was a time, ages ago, when sales and compliance were separate activities, though they continually overlapped and coalesced. Now sales and compliance are cemented together. I know that's not what you want to hear, but it's true. 

Our industry is highly regulated, but given the tally of federal and state restrictions, it is not as regulated as others. Mortgage banking is categorically grouped within the finance and banking industries. It is certainly amongst the most highly regulated industries in the country. 

So, you will need to stay alert and proactive. However, there are several things you can do to reduce the time you give to monitoring and implementing regulations. It may seem daunting, but once you build momentum, you will be able to focus much more on sales. 

To prepare for regulatory changes, you should develop a proactive framework. By "framework," I mean a plan to closely monitor regulatory changes and, where needed, assess their impact on your origination processes. This plan should include feedback to update policies, provide training, test the loan flow process, maintain documentation, use methods to track changes, and audit ongoing compliance. You'll continually tweak the plan over the years. 

I'm going to break it down for you so that you get a feel for what I'm suggesting.

 

MONITOR

 

Develop a means to monitor court cases, enforcement actions, and regulatory bulletins. Because you have a small office, designate colleagues to track these early signals.

 

RESEARCH

 

Join, subscribe, or partner with industry associations and compliance advisors, such as Brokers Compliance Group. These resources usually provide content, updates, and specialized training.

 

TECHNOLOGY

 

Reduce research costs by using a cloud-based platform to alert you to regulatory changes. If you do not have the resources, you can partner with our compliance firm to get real-time feedback.

 

ASSESS & EVALUATE

 

Determine which business areas (for instance, lending, technology, operations) are affected by new rules (such as digital signage and AVMs). Identifying the impact strengthens compliance.

 

CONDUCT AUDITS

 

Perform internal audits or external audits to review your compliance management system. For a close look at a department, function, or regulation, use our inexpensive Compliance Tune-up.

Morrie the Mortgage Mavin - A Thanksgiving Moral

Audio Podcast

Substack Audio & Article

QUESTION 

On Thursday, we will celebrate Thanksgiving – everywhere else in this country but not at my company. We are still having hard times, even if the news says otherwise. Sometimes, I need some perspective on why we get up each morning and do what we do, even when times are rough. I have always felt the mortgage industry is essential to the country's economy. However, I have friends who have been laid off. I am worried about my future and theirs. 

Still, I am committed to my work. I am thrilled every time an applicant is approved for a loan. It makes my dedication all the more meaningful. I'm nearing retirement, and I want to believe that the next generation will feel as I do about the importance of our work. I want them to have hope. We may need some coaching from you about why our work is so important. 

You can be our Morrie the Mortgage Mavin! 

Please give us some hope on this Thanksgiving.

Why is the mortgage industry important to the country? 

SOLUTION 

We recommend our AI Policy Program for Mortgage Bankers. 

We are the first compliance firm in the United States to issue a policy program for Artificial Intelligence (AI) for mortgage banking entities.  

While there are myriad standards and best practices to help organizations mitigate the risks of traditional software or information-based systems, the dangers posed by AI systems are in many ways unique. With appropriate controls, AI systems can mitigate and manage compliance risks. 

RESPONSE 

I have been called many things, but never Morrie the Mortgage Mavin. I laughed heartily when I read my new title. Our column goes back almost 20 years, and it has been a labor of love. I am grateful that it is embraced by so many thousands of readers and subscribers. 

Albert Einstein once said that we should 'strive not to be a success, but rather to be of value.' The mortgage industry consists of two main markets: the primary market, where loans are originated by residential financial institutions and issued by lenders like institutional investors, banks, and credit unions, and the secondary market, where these loans are sold to investors. Professionals in this industry perform tasks like underwriting, loan origination, and loan servicing to facilitate property ownership and investment. And, these market participants strive to be of value. 

Think of it! You are part of an immense economic endeavor encompassing, among other things, the primary and secondary mortgage markets, GSEs, loan origination and underwriting, loan servicing, and specialized lenders. If that is not a major financial sector that influences broad economic conditions and government policies, I don't know what is. 

Let me put it this way:

You would like the next generation to have hope about their importance. 

I believe you need not worry about them, because their hope for the future will lead them to develop new ways to grow the mortgage market, whatever the challenges. The same human nature that moved you to seek value also moves them.

 

It’s best to appreciate what you have rather than wanting what you do not have. The future is theirs to shape!

 

As Epicurus said, 'Do not belittle what you have by desiring what you have not; remember that what you now have was once among the things you only hoped for.' (My translation.) 

If your colleagues want to know the important of the mortgage industry, tell them that it enables homeownership. Mortgages allow individuals to purchase homes without paying the full price up front, which is essential for most people to become homeowners. 

Tell them that the mortgage market and the broader housing market it supports are a major financial sector in the U.S. Activity in the housing market, such as new home sales and construction, has ripple effects throughout the economy, influencing household spending and employment. Thus, the work they do drives economic activity. 

The U.S. mortgage market, with over $13.5 trillion in debt, is the largest and most important credit market for American households, accounting for over 70% of total consumer debt.

The Comeback of Portable Mortgages

AUDIO

SUBSTACK

QUESTION 

Our loan committee wants to originate portable mortgages. I am an old school guy! Is this the new gimmick to generate sales? I don't know, but it doesn't make much sense to me. When I was with Chase back in the eighties, there was a rollout similar to a portable mortgage. Well, it crashed and burned! Yet, now it's back. 

The whole deal mostly rests on the lock-in effect. You should explain it to your readers. And, contrary to the hype I'm hearing, the portable mortgage can lead to increased risk, and prices can go up. On top of that, there's no secondary market. 

Are portable mortgages yet another gimmick to generate sales? 

SOLUTIONS 

We recommend our Compliance Reviews. 

Comprehensive and responsive compliance reviews provide a deep dive understanding of strengths and weaknesses in the implementation of state and federal banking laws, rules, regulatory guidelines, investor expectations, and Best Practices. 

RESPONSE 

I understand your concerns, but I would not assert that private enterprises and government entities are concocting some grand scheme in considering a comeback of portable mortgages. As usual, market histrionics are fluttering about like untethered balloons. 

Granted, many features of portable mortgages pose risks for both homeowners and investors. 

Your memory of the portable mortgage offered by Chase Home Mortgage in the late eighties is correct. So, the basic structure of the portable mortgage goes back to that time. Chase viewed it as experimental in the sense that it was more of a prototype; that is, it was notionally a portable fixed-rate mortgage. 

However, true portability has never been achieved in this country. This is because of the prevalence of "due-on-sale" clauses that require the loan to be paid off when a home is sold. I remember that E-Trade offered a version in the early 2000s as a portable "option." Around that time, my firm provided compliance guidance to E-Trade in its development of mortgage banking compliance, but a compliance review of the portable "option" was not in our remit. The fact is, portable mortgages have remained niche products, at best. And for good reason, which I will explain shortly. 

One reason it did not catch on is obvious: the U.S. mortgage industry's structure, in which loans are often sold to investors or entities like Fannie Mae and Freddie Mac, has historically not supported portability. 

No portable mortgages are currently allowed by Fannie Mae and Freddie Mac, but the Federal Housing Finance Agency (FHFA) is now actively evaluating whether to implement them in the future. Current news reports that the FHFA is working with Fannie Mae and Freddie Mac to determine how to make these loans possible in a safe and sound way, which strikes me as quite a heavy lift. Currently, Fannie and Freddie only allow fixed-rate loan transfers in limited situations, such as due to the death or divorce of the original borrower. 

The "hype" you are hearing concerns the GSE approval of portable mortgages, based on the claim that they could make it easier for homeowners to move and keep their lower interest rates, thereby unlocking more homes for sale. Maybe so. Then again, maybe not. 

Let's tack down a few important details about the structure of portable mortgages. 

A portable mortgage is a home loan that allows a homeowner to transfer their existing interest rate and terms to a new property when they move. In theory, this can save the homeowners money on closing costs and help them avoid taking out a new loan at a potentially higher interest rate. Nevertheless, the new property must meet the lender's criteria, and the homeowner must requalify financially. 

PORTABLE MORTGAGE TRANSACTIONS 

Here is a brief outline of how the portable mortgage works: 

·       Transferring the Loan 

When selling one home and buying another, the existing mortgage is "transferred" to the new property.

The 50-Year Mortgage – Pros & Cons

The 50-Year Mortgage – Pros & Cons

QUESTION 

I am the underwriting manager for a mid-sized regional lender. Recently, an investor asked us if we would be interested in originating 50-year mortgages. This mortgage loan has been in the news a lot recently because the president has been pushing it. 

Yesterday, our loan committee met and decided to look into the pros and cons of 50-year mortgages. Next week, we have to present a report to senior management, and they will decide if it should be brought to the board for discussion. 

I do not want to parrot the mortgage news. Some of this news media seems more interested in driving sales than in what might be good for borrowers or the risks to lenders. I am asking you to share your perspective with us. I know you do not mix words. 

What are the pros and cons of 50-year mortgages for borrowers and lenders?  

COMPLIANCE SOLUTION 

We recommend our Compliance Library. 

A dynamic, digital compliance library consisting of master policies and procedures, reflecting a financial institution's size, complexity, and risk profile, ensuring conformance with primary regulatory guidelines and federal and state mortgage and consumer loan originations. 

RESPONSE 

The promoting of this loan product, such as it is, has been stirred up recently by the president's remarks and massive news coverage. In my opinion, the president is recommending a flawed loan that is detrimental to a consumer's long-term financial interests, and the news media, as usual, is chasing a shiny object that supposedly highlights sales over substance. 

A 50-year residential mortgage is a home loan with a repayment period of 50 years (600 months!), significantly longer than the standard 30-year term. Its primary benefit is lower monthly payments, which can make homeownership more accessible. Fair enough! However, this comes at the cost of paying substantially more in total interest over the life of the loan, and it results in much slower equity accumulation. 

I suppose that stretching the loan over a longer period reduces the monthly principal and interest payments. To that extent, it could help some first-time buyers qualify for a mortgage or afford a more expensive home. The term "affordability" has become quite a hobby horse these days, given that monthly payments could open up homeownership to more people, especially in expensive housing markets. Ultimately, it will not beneficially resolve the affordability issues that consumers face today. 

But a 50-year mortgage seems like a form of indentured servitude. Over 50 years, the total amount of interest paid on the loan can be hundreds of thousands of dollars more compared to a 30-year mortgage. A central pillar of building equity in our society, home ownership, is seriously derailed because of slower equity growth. A much larger portion of early payments goes toward interest, meaning you accumulate equity much more slowly. It could take 30 years or more to build up significant equity, compared to about 12-13 years for a 30-year mortgage (excluding appreciation and down payment). 

Plus, the interest rates are higher. Lenders will charge a higher interest rate on a 50-year mortgage to compensate for the increased risk of lending for a longer period. Thus, mortgage originations would tread into uncharted territory. This is a new product, and lenders may be uncertain about the long-term risks, which could impact its availability and cost. 

Let's discuss these primary factors involved in 50-year mortgages: 

·       Feasibility

·       Alternatives

·       Legislative and Regulatory Changes

·       Impact on the Housing Market

·       Impact on the Economy

·       Inflationary Risk 

FEASIBILITY 

The 50-year mortgage is currently an idea under consideration, not an approved policy. But ideas often have a way of working themselves somehow into politics and policies. I am skeptical that certain key issues can be disposed of through politically palatable, economically viable, and financially responsible policies, even by way of legal and regulatory compliance. I'll mention but a few that come to mind.

AI Policy Program for Mortgage Banking

QUESTION 

We need guidance on using artificial intelligence in our mortgage banking and servicing operations. Unfortunately, we have not found anything of much value. As the President and CEO of our company, I have met with our Board for almost a year to discuss governance and the utilization of AI. Being present in all states and territories, we require guidance on both state and federal requirements nationwide. 

Our lawyers provide us with white papers and legal guidance, but we have yet to receive policies based on mortgage banking experience and expertise. The last policy we got from them was basically useless. I'm a lawyer myself, but I don't need citations or case law. Why is it taking so long for professionals to provide us with the guidance we need to ensure compliance with AI-related issues? 

We need your help. For years, we have been following you. Recently, we decided to use your firm to support our compliance department. I spoke to you recently about this AI challenge, and you told me that your team is working on a comprehensive AI policy. I believe you said it would be published this month. Please share your AI policy with the mortgage community. 

What is the policy on artificial intelligence you are offering? 

COMPLIANCE SOLUTION 

Artificial Intelligence Policy Program for Mortgage Banking

ANSWER 

I enjoyed our call. We look forward to working with your compliance personnel. Indeed, we assembled a team of our compliance experts to develop policies and procedures for artificial intelligence. It quickly became clear that one policy would not do. In fact, several policies are needed. We realized that a comprehensive policy program was required, rather than just a single policy. A programmatic structure best meets the compliance demands. 

Today, we are issuing the first set of AI policies and procedures specifically designed for the mortgage banking industry. Consistent with its comprehensive approach, we have structured it as a policy program. Thus, there is a cost-effective base policy, as well as several supporting policies. At no additional cost, we maintain and expand the policy program for the first twelve months, as needed, and extensions are available. Updating is necessary in response to the rapidly changing regulatory environment associated with artificial intelligence. 

A few days ago, we conducted a demonstration for several regulators, examiners, and our money center bank clients. The feedback was enormously encouraging, and we were grateful for their interest. 

Order as soon as possible. There is already considerable demand! We will schedule collaborative support! 

Request Information Form

New Issuance 

Here is the Press Release! 

Outline 

Artificial Intelligence Policy Program for Mortgage Banking™

1.     Artificial Intelligence Policy Program for Mortgage Banking – Overview

2.     Artificial Intelligence Policy – Foundational Guidelines

3.     Artificial Intelligence Workplace Policy

4.     Artificial Intelligence Credit Underwriting Policy

5.     Artificial Intelligence - Do & Do Not Policy

6.     Artificial Intelligence - Ethics Policy

Each of these policies interacts with and complements the others.

It is essential to work with our LCG Compliance Managers to conform the texts to ensure the policies accurately reflect the financial institution's actual use of Artificial Intelligence in its operations.

• Policies are reviewed as stand-alone documents. A consolidated version of the policies is available.

• LCG Compliance Manager support is included in the purchase price of the policy documents.

• LCG will maintain the subject policies and procedures for 12 months from the purchase date.

Every effort will be made to conform the policies to the institution's compliance management system.

Upon reaching the final version, the Master is kept in our encrypted extranet for your use. The Master version is retained in the extranet and updated for substantive changes in applicable laws and Best Practices.

Request Information Form

For additional support or information, please email compliance@lenderscompliance group.com. 

Contact Us via our website.

For more articles on this topic, please visit: Artificial Intelligence.

________________________ 

This article, Artificial Intelligence Policy Program for Mortgage Banking, published on October 30, 2025, is authored by Jonathan Foxx, PhD, MBA, the Chairman & Managing Director of Lenders Compliance Group, the first and only full-service, mortgage risk management firm in the United States, specializing exclusively in residential mortgage compliance.

CFPB’s Massive Withdrawal of Guidance

QUESTION 

The CFPB recently withdrew guidance for many policies and legal interpretations. As my company’s  Chief Risk Officer and General Counsel, I was asked by our Board to provide an outline of the CFPB's withdrawn guidance and the effect such withdrawal will have on lending and servicing. I have reviewed all the withdrawn documents and written an analysis of their impact. However, I still can’t figure out the difference that the withdrawn guidance makes in our legal and regulatory risks. 

So, I am writing you for some feedback. I don’t need an outline of every withdrawn document. What I’m looking for is some insight into the overall impact of withdrawing the guidance. Our external law firm provided an excellent overview. But I would like something more conclusory with respect to the practical effect caused by the withdrawal. 

Long time subscriber! Thank you for your outstanding articles. We appreciate your clarity and straightforward responses. 

What impact does the withdrawal of the massive withdrawal of CFPB guidance documents have on mortgage originators and servicers? 

SOLUTION 

CMS Tune-up

RESPONSE 

Thank you for your kind words! My articles are a labor of love. I enjoy writing them, and I am grateful that you read them. Before I dig into the implications of the CFPB’s withdrawal of numerous guidance issuances, let me offer a few historical facts. 

Recent History 

The withdrawals of guidance stems from an Executive Order (EO) 13891 that goes back to 2019, which directed agencies to avoid using guidance documents to create regulatory burdens on the private sector.[i] President Trump issued the EO in his first term, and the Biden administration later rescinded it. 

The CFPB is maintaining that the principles the EO outlined are consistent with the requirements of the Administrative Procedure Act (APA), which are noted in the CFPB’s April 11, 2025 internal memo. The memo imposed a moratorium on the issuance of new guidance documents and initiated a full review of all existing guidance. The CFPB is supposed to complete the review by April 25^th. Any guidance not explicitly flagged to be retained, with a clear justification, would be subject to rescission.[ii] 

Three Reasons for the Withdrawal 

There are three ostensible reasons for the withdrawal of these guidance issuances: 

1.   The CFPB will now only issue guidance when it is truly necessary and when such guidance will lower, rather than raise, compliance burdens for regulated entities. 

2.   In response to President Trump’s deregulatory initiatives aimed at reducing bureaucracy, the CFPB is scaling back its enforcement activities and, as a result, does not require interpretive guidance to remain in effect at this time. 

3.   The CFPB has determined that there are no significant reliance interests justifying the retention of the withdrawn guidance. This is because parties generally recognize that guidance is nonbinding and does not create substantive rights. 

The Bureau says that while some guidance, or parts thereof, may be reinstated, it does not intend to prioritize enforcement against parties that do not conform to them during the period of withdrawal. 

What a Difference a Difference Makes 

In your inquiry you state that you “can’t make sense of the difference it makes in our legal and regulatory risks.” Frankly, I think your confusion is justified. I will explain shortly. Suffice it to say, for now, that withdrawal of the guidance documents will have little legal effect. Before getting to my view, let me mention a few areas that seem to be headlining as regulatory issues.

Free Market Dogma

QUESTION 

I am a former employee of a lender whose president is a hard-core hater of the CFPB. He believes that our government is out of control and the CFPB has been overreaching for years. He is glad that the CFPB is being shut down. I was a paralegal in the legal department. After having to put up with his railing and cursing about the government in general and the CFPB in particular, I decided to resign. Since then, I have been with a law firm and continue to attend law school. 

It's not as if his mortgage company has been in trouble with the CFPB. It complies with all the rules and regulations, and every audit by states and the CFPB itself has shown that the company complies adequately. There have been no administrative actions or fines. 

From what I can tell, the CFPB is a kind of anti-scam police. They are also involved in protecting consumers' financial interests with respect to financial products and services. I can't figure out why this is such a bad thing that it should be destroyed. I thought regulating on behalf of consumers is what good government is supposed to do. We can debate what overreach and unnecessary regulations are, but destroying the agency that actually helps consumers seems really dangerous. 

My former boss takes the position that any government involvement in the free market is an attack on free enterprise, which to him means running his business the way he wants to run it. And, any agency, like the CFPB, that regulates his company is an attack on its survival. I think that's really very extreme. I got tired of trying to convince him otherwise. 

I know this is controversial. I want to widen the lens a bit. You have always been willing to discuss controversial subjects. My former president reads every post you've written for years. I'm sure he will recognize me as the questioner, though I didn't tell you his name or company name. It may bother him that I am writing to you. Fortunately, I am no longer an employee. 

He often discusses your views and interpretations of the law. I have subscribed for years. I think you are a reliable resource for regulatory guidance. I want to know your view. It would really help! 

Is government involvement in free markets justifiable? 

COMPLIANCE SOLUTION 

Management Tune-up 

RESPONSE 

I respond to controversial subjects as they may relate to many aspects of regulatory compliance. I make no apologies. I know they are controversial because we predictably get a small tranche of unsubscribes whenever I discuss a topic that bugs the unsubscribers. Sometimes, the unsubscribers write to me, and we have enjoyable correspondence. 

We offer this newsletter as a labor of love. It's free! All are welcome. However, I discuss the regulatory landscape with all its ups and downs, controversies, and wrangling, and always try to ensure that compliance with the law is clarified. My goal is to educate and offer some helpful guidance. 

Anyone who does not recognize that the government partners with markets, be it mortgage or any other economic market, exhibits a view that borders on willful ignorance. I have taught graduate classes on market action relating to mortgage origination, and one obvious factor we discuss is the "free market" concept, which is the thesis that markets should not allow government involvement (often framed as "government interference"). 

"Free market" lingo wears several masks, such as "free trade" and "free enterprise," but the notion that any economic market is free of government involvement is belied by the fact that the government must be involved in ensuring and monitoring its legal and regulatory framework. 

Now, for a dose of reality: 

There has never been a free market in the history of the world.

Never. Nowhere. Not now. Not ever. 

The concept indirectly stems from an economic theory called "laissez-faire" – which, in French, means "allow to do" – which is a financial concept that purports to inform free markets and capitalism. In that scenario, the government does not regulate business, taxes, or tariffs. Instead, it proposes that a market self-regulates through the economic mechanism of supply and demand of products and services. And, it asserts that individuals drive markets through self-interest, which, somehow, leads to social and economic benefits.