The Trump administration has made sweeping changes at all levels of the federal government, slashing spending, cutting staffing and revamping policies to fit its agenda. There’s no place where this is more evident than at the Consumer Financial Protection Bureau (CFPB).
This week, multiple media outlets reported that a CFPB Enforcement Director Cara Petersen resigned, penning a scathing indictment of recent changes made by the administration and claiming that the bureau is no longer serious about carrying out its core functions, citing what she called “inexplicable dismissals of cases, and terminations of negotiated settlements that let wrongdoers off the hook.”
Once a powerful consumer watchdog created in the wake of the 2008 financial crisis, Trump’s CFPB indisputably looks very different today. The agency is on the brink of losing 1,500 employees as the Trump administration’s staffing cuts work their way through the federal courts.
If the administration has its way, only 200 people will remain at the CFPB to carry out the agency’s mandate to enforce consumer financial protection laws, reducing its capacity for enforcement as well as its scope.
On May 12, CFPB Acting Director Russell Vought rescinded 67 guidance documents the CFPB has issued, with some dating all the way back to 2011 when the CFPB was established.
According to Vought, the move was in line with President Trump’s directives to “deregulate and streamline bureaucracy,” as well as eliminate the overlap and duplication of other federal and state regulators. As a result, “the Bureau is reducing its own enforcement to only those areas statutorily required,” Vought noted in a rule published in the Federal Register.
With these changes, civil rights advocates worry that the future of fair housing enforcement, particularly redlining and mortgage discrimination, hangs in the balance.
While some industry leaders argue the overhaul at the CFPB is long overdue to streamline operations and curtail regulatory overreach, some worry these moves could invite a return to discriminatory lending practices going unchecked.
Under the new regime, the priorities at CFPB are clear: mortgage fraud will receive the most attention. But conspicuously absent from the agency’s high-priority list are fair housing enforcement activities that it previously pursued with vigor.
For example, the CFPB moved to vacate its settlement with Townstone Financial for alleged redlining violations based on racially discriminatory comments executives made on a radio show. Townstone Financial agreed to pay a $105,000 penalty to settle the case with the CFPB in November 2024.
“They reviewed the mortgage case and they said, ‘Okay, tell us the name of the borrower that was harmed.’ They couldn’t identify one,” said Taylor Stork, president of the Community Home Lenders of America (CHLA), a trade group representing independent mortgage banks (IMBs). He noted that the investigation and following enforcement were based on theoretical borrowers, not actual borrowers, which exceeds CFPB’s scope.
Stork’s organization argues that IMBs are over-regulated compared to the big banks. As he noted, “An IMB is regulated by every single state in which they’re licensed” and potentially by “54 or 55 institutions, organizations, regulators,” while “there are nearly 5,000 banks that are not regulated by the CFPB.”
Sounding the alarm on fair housing enforcement gaps
The view from fair housing advocates is dramatically different as they closely watch the Trump administration’s dramatic pivot to slash the federal budget and purge diversity, equity and inclusion initiatives from all corners of the government, including the CFPB.
Sasha Samberg-Champion, special counsel for civil rights at the National Fair Housing Alliance, describes the current situation as “really a multifront war” against fair housing enforcement.
“You’re seeing basically all the fair lending staff have been let go in some fashion,” Samberg-Champion said. “But you also see that at a bunch of other agencies, too. You see that at HUD, with the fair housing staff having been decimated.”
The concern extends to data collection and reporting requirements that enable fair housing enforcement.
“We certainly are extremely concerned about attempts to degrade the utility and availability of the basic information that you need to understand what is going on in the world,” Samberg-Champion added.
It’s certainly an abrupt about-face from the CFPB’s fair housing enforcement activity during the Biden administration.
The CFPB and Department of Justice (DOJ) alleged that Fairway illegally redlined Black neighborhoods in Birmingham, Alabama, including through its marketing and sales actions, resulting in a significant enforcement action. The lender, the government had alleged, violated the Fair Housing Act, Equal Credit Opportunity Act and Consumer Financial Protection Act.
Last October, Fairway agreed to pay $8 million and a $1.9 million civil penalty to the CFPB’s victims’ relief fund.
The settlement was part of the DOJ’s broader Combatting Redlining Initiative, which had secured more than $150 million in relief for communities of color nationwide.
In another redlining case, the DOJ and CFPB recently filed a motion to terminate a consent order against Trustmark Bank over its alleged redlining activity from 2014 to 2018, according to federal court records. This undid the work of the previous CFPB, which brought its case against the lender in 2021, securing a $5 million penalty in the five-year consent order. Now, the lender is free from the order 17 months early.
How CFPB pullback complicates data tracking
Another concern fair housing advocates like Samberg-Champion share is how a weakened CFPB, HUD and other housing-related federal agencies will impact data reporting and transparency.
The rate of nonreporting of demographic information has risen since 2019, potentially limiting CFPB and other regulatory bodies from detecting and addressing redlining, borrower discrimination and other fair housing violations.
For instance, Home Mortgage Disclosure Act (HMDA) data is the most comprehensive source of publicly available information on mortgage market activity. The data is used by industry leaders, consumer groups, regulators and civil rights advocates to assess potential fair lending risks.
Samberg-Champion emphasized this concern: “We rely on the government reporting certain things so that we know what the loan denial rates are based on certain characteristics, right?”
The nature of discriminatory lending has evolved, making enforcement more complex. As Samberg-Champion explained, “The nature of redlining has changed a little bit now that everything is digital. That doesn’t mean you can’t figure it out, but it just has changed what you’re looking for when you think about redlining.”
He cited examples of modern discrimination: “I’ll give you another example, which is people who are charging different rates in different areas,” he said. “That’s just another way to say that we’re going to discriminate against communities that have been historically starved of credit and punish them for the very unavailability of credit in their markets previously.”
The level of sophistication needed to spot these problematic trends requires expertise that may be lost with staff reductions at the CFPB and elsewhere, Samberg-Champion said.
“It’s a horrible time for that sophistication to be destroyed at the agencies,” he pointed out.
The financial reality for IMBs
Independent mortgage banks and mortgage subsidiaries of chartered banks lost an average of $1,056 on each loan they originated in 2023, down from an average loss of $301 per loan in 2022. This represents a series high in the 15-year history of the Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Report.
Although this has improved recently—IMBs and mortgage subsidiaries of chartered banks reported an average profit of $443 on each loan they originated in 2024, up from an average loss of $1,056 per loan in 2023—compliance costs remain a significant burden for independent mortgage lenders.
“While overall production profits were positive, some lenders are still struggling in this tough market environment,” Marina Walsh, MBA’s vice president of industry analysis, said in a news release. Lenders that closed less than $500 million in loan volume in 2024 continued to see average net production losses for a third straight year, Walsh noted.
“It has been difficult to spread the fixed costs of originating loans over lower volume,” Walsh added.
Regulatory hurdles, along with higher costs to obtain credit reports, which is required for most loan programs, create added costs for IMBs that are eventually passed on to consumers, Stork explained.
“When you have to operate in a zero-defect (business) model, you have to be so unbelievably careful with every single thing you do that you have to have triple checks and quadruple checks,” Stork said. “The cost of triple- and quadruple-checking every single thing goes right into the rate sheet and gets passed right through to the borrowers.”
The debate often centers on the balance between compliance costs and consumer protection. IMBs have legitimate concerns about regulatory burden affecting their competitiveness and borrowers’ costs.
Take credit report fees as an example: Compared to 2022, mortgage lenders in 2023 saw a price increase between 10% and 400% for credit reporting services alone.
Stork argues that borrowers ultimately bear these costs.
“Borrowers spend thousands of dollars in excess fees in order for the lender to be able to dance through the raindrops and not get wet.”
CFPB may be narrowing scope, but lenders are still being watched
Peter Idziak, a senior associate attorney at Polunsky Beitel Green, LLP, who represents mortgage lenders and banks in consumer financial cases, acknowledges the industry may see “fewer federal resources focus on this space,” but that doesn’t mean oversight is completely disappearing.
“The Dodd-Frank Act does allow state attorneys general to enforce the consumer financial protection laws, and several states have increased resources in that space, and the industry itself does a fair bit of policing,” Idziak noted.
“Lenders should focus on what the actual laws and regulations are in force…to the extent that you know the laws and regulations are still on the books; clients should still follow them.”
However, if lenders think they can shirk the law without repercussions in the future, they’re mistaken, Idziak said.
“One thing at the federal level, the lookback period for a lot of these investigations has been anywhere from five to seven years,” he pointed out. “You could have a Democratic administration in 2028 that comes back and says, ‘You know, it doesn’t matter what the Trump administration focused on, it matters what the law was at the time.’”
