Mortgage Banking Update - July 24, 2025 - Financial Services

July 24 – Read the newsletter below for the latest Mortgage Banking and Consumer Finance industry news, written by Ballard Spahr attorneys. In this issue, our lawyers examine a federal court's order granting a universal injunction in a new birthright citizenship lawsuit, Congress's legislation to protect veterans from foreclosure through reauthorization of VA home loan partial claims, HUD's decision to rescind certain FHA mortgage loan requirements, a ruling to vacate the CFPB medical debt rule, and much more.

Podcast Episode: Can the President Remove Governors of Federal Independent Agencies Without Cause?

This podcast show focuses generally on the so-called "Unitary Executive Theory" and specifically on the legality of President Trump firing without cause the Democratic Commissioners of the Federal Trade Commission and the members of other independent agencies, despite language in the governing statutes that prohibit the President from firing a member without cause and a 1935 Supreme Court opinion in Humphrey's Executor holding that the firing of an FTC Commissioner by the President is unlawful if done without cause.

Our guest is Patrick Sobkowski who teaches constitutional law, courts and public policy, and American politics at Marquette University. His scholarship focuses on constitutional and administrative law, specifically the administrative state and its relationship to the other branches of government.

Our show began with an explanation of the "Unitary Executive Theory," which is defined as a constitutional law theory according to which the President has sole authority over the executive branch including independent federal agencies. It is based on the so-called "vesting clause" of the Constitution, which vests all executive power in the President. The theory often comes up in disagreements about the president's ability to remove employees within the executive branch (including Federal agencies); transparency and access to information; discretion over the implementation of new laws; and the ability to control agencies' rule-making. There is disagreement about the doctrine's strength and scope. More expansive versions are controversial for both constitutional and practical reasons. Since the Reagan administration, the Supreme Court has embraced a stronger unitary executive, which has been championed primarily by its conservative justices.

We then discussed a litany of Supreme Court opinions dealing with the question of whether the President has the unfettered right to remove executive agency employees:

Myers v. US (1926)
Humphrey's Executor (1935)
Morrison v. Olson (1988)
Seila Law (2020)

We then discussed President Trump's removals of the Democratic members of the National Labor Relations Board and Merit Systems Protection Board and the Supreme Court's opinion and order staying the lower court's order that the removals were unlawful. In addition to casting doubt on the continued viability of Humphrey's Executor, the Court included dicta to the effect that the logic of its opinion about the NLRB and the MSPB would not apply to the Federal Reserve Board because the Fed is not really an executive agency and that its functions are more akin to the functions performed by the First Bank and Second Bank of the United States.

Alan Kaplinsky, the founder and former practice group leader for 25 years and now senior counsel of the Consumer Financial Services Group, hosted the podcast.

To listen to this episode, click here.

Consumer Financial Services Group

Podcast Episode: Legislating for the Future

This podcast show today features Professor Jonathan Gould of University of California (Berkeley) Law School who discusses his recent article cowritten with Professor Rory Van Loo of Boston University School of Law, which was recently published in the University of Chicago Law Review titled "Legislating for the Future".

The introduction of the article describes "legislating for the future" as follows:

Public policy must address threats that will manifest in the future. Legislation enacted today affects the severity of tomorrow's harms arising from biotechnology, climate change, and artificial intelligence. This Essay focuses on Congress's capacity to confront future threats. It uses a detailed case study of financial crises to show the limits and possibilities of legislation to prevent future catastrophes. By paying insufficient attention to Congress, the existing literature does not recognize the full nature and extent of the institutional challenges in regulating systemic risk. Fully recognizing those challenges reveals important design insights for future-risk legislation.

During the podcast, we discuss the dynamics around enacting legislation through Congress that aims to increase the stability of the financial system and prevent financial crises. We discuss with Professor Gould about why passing this sort of legislation is so difficult and what Congress might be able to do about that.

We consider the following questions:

What are the basic dynamics that make it so hard to pass financial stability legislation?
How does the structure of Congress affect the difficulty of passing financial stability legislation?
We have seen some big bills lately, like former President Biden's Inflation Reduction Act and the big taxing and spending bill from President Trump this year. Why is financial regulation harder to enact than these other types of legislation?
Has it gotten easier or harder over time to enact financial regulation?
What happens after financial stability legislation is enacted?
What can Congress do to enhance its capacity in this area?
What types of legislative drafting techniques are likely to be especially promising?
What role is there for federal agencies to play in augmenting congressional capacity?
What role is there for states or private plaintiffs to play in augmenting congressional capacity?
What relevance does this all have beyond financial regulation?
In light of the fact that the article was published before the 2024 election and change in administration are any of Professor Gould's conclusions altered by more recent events?

This podcast was hosted by Alan Kaplinsky, founder and former chair for 25 years and now senior counsel of the Consumer Financial Services Group.

To listen to this episode, click here.

Join Our Webinar on the Supreme Court's Recent Landmark Ruling on Universal Injunctions

On August 13, 2025, from 12:00 to 1:30 PM ET, we invite you to join us for an insightful webinar exploring the U.S. Supreme Court's pivotal 6-3 decision in Trump v. CASA, Inc., a ruling that significantly curtails the use of nationwide or "universal" injunctions. This landmark case marks a turning point in federal court jurisprudence, with profound implications for equitable relief, national policy, and governance.

Our distinguished panel of legal scholars and experienced litigators will dive deep into the Court's decision, unpacking its historical foundation, analyzing the majority, concurring, and dissenting opinions, and evaluating its far-reaching effects on all stakeholders, including industry groups, trade associations, federal agencies, the judiciary, the executive branch, and everyday citizens.

What You'll Learn

This webinar will cover critical topics, including:

The originalist and historical reasoning behind the Court's rejection of universal injunctions
A detailed analysis of the majority, concurring, and dissenting opinions
The ruling's impact on legal challenges to federal statutes, regulations, and executive orders
The potential role of Federal Rule of Civil Procedure 23(a) and 23(b)(2) class actions as alternatives to universal injunctions, including the status of the CASA case, and other cases where plaintiffs have pursued class actions
The use of Section 706 of the Administrative Procedure Act to "set aside" or "vacate" unlawful regulations and Section 705 to seek stays of regulation effective dates
The viability of associational standing for trade groups challenging regulations on behalf of their members
The ruling's influence on forum selection and judicial assignment strategies, including "judge-shopping"

Why Attend?

This is a unique opportunity to hear from leading experts as they break down one of the most consequential and controversial Supreme Court decisions of this Supreme Court term. Whether you're a legal professional, policymaker, or industry or consumer stakeholder, this webinar will provide valuable insights into how this ruling reshapes the legal landscape.

Event Details

Date: August 13, 2025
Time: 12:00 – 1:30 PM ET (Log-in begins at 11:45 AM ET)
CLE Credits: Approved for 1.5 CLE credits in CA, NV, NY, and PA; 1.8 CLE credits in NJ. CO, and WA State CLE credit is pending. Uniform Certificates of Attendance will be provided for seeking credit in other jurisdictions.

Featured Speakers

Suzette Malveaux, Roger D. Groot Professor of Law, Washington and Lee University School of Law
Portia Pedro, Associate Professor of Law, Boston University School of Law
Carter G. Phillips, Former Assistant to the Solicitor General of the United States and Partner, Sidley Austin LLP
Burt M. Rublin, Senior Counsel and Appellate Group Practice Leader, Ballard Spahr LLP
Alan Trammell, Professor of Law, Washington and Lee University School of Law

Moderator

Alan S. Kaplinsky, Founder and Former Practice Leader, Consumer Financial Services, Ballard Spahr LLP

How to Join

Don't miss this chance to gain a deeper understanding of this groundbreaking Supreme Court decision. Register now to secure your spot!

We look forward to seeing you on August 13!

Consumer Financial Services Group

Unlocking New and Exciting Fintech Opportunities: Join Our Webinar on August 12, 2025

The consumer financial services landscape is undergoing a transformative shift under the second Trump administration, with significant deregulatory changes at the Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC), and federal banking agencies. These developments are creating exciting opportunities for banks, fintech companies, and innovators to explore new business models and expand market reach. To help you navigate this evolving environment, Ballard Spahr is hosting a timely complimentary webinar, "New Consumer Financial Services Fintech Business Opportunities Arising from Deregulation at the CFPB," on August 12, 2025, from 12:00 to 1:30 PM ET.

What to Expect

In this 90-minute webinar, our experienced attorneys will dive into the implications of recent deregulatory actions at the federal level and how they are reshaping the consumer finance industry. We'll explore how reduced barriers to entry and lower compliance costs are paving the way for innovative financial products and services. Key topics include:

Emerging Product Opportunities: Learn which consumer financial products are gaining traction in the current regulatory climate, including:
- Buy Now, Pay Later (BNPL)
- Earned Wage Access (EWA)
- Income Share Agreements (ISAs)
- Rent-to-Own Financing
- Open Banking
- Home Equity Investment Products
- HELOCs
- Consumer Leases
- Longer-Term Installment Contracts at Point of Sale
- Small-Dollar, Short-Term Installment Loans
- Credit-Builder Loans
- Crypto-Backed Loans and Credit Products
- Digital Wallets with Credit-like Features
Regulatory Insights: Understand the extent to which these products remain subject to CFPB oversight, state laws, licensing requirements, and other regulations.
Strategic Advantages: Discover how fintechs, banks, and other financial institutions can leverage deregulation to innovate and reduce operational costs.

Who Should Attend?

This webinar is designed for a wide range of professionals, including:

In-house counsel
Compliance professionals
Product developers
Fintech and bank executives
Investors

Whether you're looking to launch a new product, expand your market presence, or stay ahead of regulatory changes, this session will provide actionable insights to guide your strategy.

Event Details

Date: August 12, 2025
Time: (Log-in at 11:45 AM ET, Program from 12:00 PM – 1:30 PM ET)
Format: Virtual Webinar
CLE Credits: Approved for 1.5 CLE credits in CA, NV, NY, and PA; 1.8 NJ credits. CO and WA state CLE credit is pending. Uniform Certificates of Attendance will be provided for seeking credit in other jurisdictions.

Why Attend?

Ballard Spahr's Consumer Finance Monitor team has been closely tracking deregulatory trends through our blog, webinars, and podcasts. This webinar, driven by popular demand, distills our insights into a focused discussion on how these changes create new opportunities for growth and innovation. Our speakers will provide practical guidance to help you capitalize on the evolving regulatory landscape while staying compliant with remaining regulatory requirements at the state and federal level.

Register Now

Don't miss this opportunity to gain a competitive edge in the rapidly changing world of consumer finance. Click here to register for the webinar and secure your spot.

We look forward to seeing you on August 12 as we explore the future of fintech and consumer financial services in this dynamic regulatory environment!

Consumer Financial Services Group

Federal Court Issues Order Granting Universal Injunction to a Provisionally Certified Class in New Birthright Citizenship Lawsuit

In the aftermath of the Supreme Court's ruling on June 27 invalidating universal injunctions as the remedy imposed by three federal district courts that had determined that President Trump's executive order limiting birthright citizenship (the Executive Order) is unconstitutional, a Federal District Court in New Hampshire, in a one-page order, provisionally certified a class (the Class) composed of:

All current and future persons who are born on or after February 20, 2025, where (1) that person's mother was unlawfully present in the United States and the person's father was not a United States citizen or lawful permanent resident at the time of said person's birth, or (2) that person's mother's presence in the United States was lawful but temporary, and the person's father was not a United States citizen or lawful permanent resident at the time of said person's birth.

Immediately following the issuance of provisional certification of the Class, the Court, in a one-page order, issued a universal preliminary injunction against the Federal Government, prohibiting it from enforcing the executive order. The beneficiaries of the injunction are all persons in the Class, not just the named-plaintiffs.

The district court stayed its orders for seven days in order to give the Government time to appeal the orders. The Government opposed both motions and will undoubtedly seek a stay from the First Circuit Court of Appeals and then, if necessary, the Supreme Court.

This is the first set of orders issued by a district court that purports to follow the blueprint of the Supreme Court to use class certification as an alternative to seeking a universal injunction in a non-class, individual case. If the stays are denied by the Circuit Court and Supreme Court, this case might prove to be a harbinger of how plaintiffs who desire universal injunctions will proceed in challenging the validity of Federal statutes, regulations, and executive orders.

When the Supreme Court in the CASA v. Trump majority opinion suggested that class certification might be an acceptable way for plaintiffs to obtain a universal injunction, it cautioned that it would not approve of a district court rubber stamping a class certification motion and that the district court must conduct a painstaking review to satisfy itself that the plaintiff has satisfied all of the requirements of Rule 23(a) and (b)(2) of the Federal Rules of Civil Procedure (which apply to class motions seeking only equitable relief). I have serious doubt whether the one-page conclusory order issued by the district court in this case will satisfy those requirements.

While filing a class action complaint might work in this case and other cases where plaintiffs are challenging federal statutes, regulations, and executive orders, that strategy is less promising in cases brought by industry trade groups that are trying to enjoin the Government from enforcing an unlawful statute, regulation, or executive order. Those trade groups are motivated in such instances to help their members and there is little reason for them to embark on filing a class action, which is generally not needed in order to obtain complete relief for their members. Class actions greatly increase the complexity and cost of the lawsuit and extend the time needed to obtain a satisfactory result.

If it is important for a trade group to obtain universal relief in challenging a regulation, it may be possible to proceed under Section 706 of the Administrative Procedure Act, which authorizes a court to "vacate" or "set aside" an unlawful regulation without the need to obtain injunctive relief. There is great uncertainty and scholarly debate as to whether a court would be authorized to issue a preliminary order at the outset of a case preliminarily vacating or setting aside a regulation. Section 706 might apply only at the end of the lawsuit in which the plaintiff has prevailed.

Also, as stated in our earlier blog about the Supreme Court case, there is concern that the Supreme Court might in a future case override its opinion that grants associational standing to trade groups to seek relief on behalf of their members. Justice Thomas strongly believes that associational standing is unconstitutional under the "case or controversy" clause. Such a result would make it much more difficult for the industry to challenge an unlawful statute, regulation, or executive order.

Alan S. Kaplinsky

Supreme Court Allows Massive Firing of Government Employees, but CFPB Case Is on Separate Track

In Trump v. American Federation of Government Employees, a case on its emergency docket that could have implications for the CFPB, the Supreme Court issued a brief opinion allowing the Trump administration to fire tens of thousands of workers at 19 different federal government agencies while appeals over the firings continue.

The CFPB is not among the agencies involved in the Supreme Court case, but the case could provide a hint about the next developments in National Treasury Employees Union v. Vought, a case in which the Trump administration seeks to fire more than 1,400 bureau employees. Planned layoffs at the CFPB are held up by the U.S. Court of Appeals for the District of Columbia, which could decide any day whether to continue the delay.

"We are not among the 19 plaintiff agencies," a National Treasury Employees Union spokesperson said in a statement, as reported by Bloomberg News. "We are not directly impacted. We also have our own litigation which currently prohibits [reductions in force, or RIFs] and firings at least until the D.C. Circuit issues its decision."

In the Supreme Court case, the Court did not issue a signed opinion, but did grant an emergency appeal from the administration, which was seeking approval to enforce a February 11 executive order that allowed agencies to implement large-scale Reductions in Force.

The decision lifts an injunction that had been issued by Judge Susan Illston of the U.S. District Court for the Northern District of California. She had blocked the firings because the administration had not consulted with Congress before issuing its plans.

The Supreme Court's majority said, that "we express no view on the legality of any" agency plans for firings or agency restructuring. "Those plans are not before the court," the Justices said.

The Justices said that President Trump has the power to issue and enforce the executive order.

As typically happens with cases on the emergency docket, the Supreme Court did not announce the votes of the individual justices. However, there is a lengthy dissent by Justice Ketanji Brown Jackson, who wrote that President Trump should have worked with Congress on the downsizing plan.

"Under our Constitution, Congress has the power to establish administrative agencies and detail their functions," she wrote. "The President sharply departed from that settled practice on February 11, 2025, however, by allegedly arrogating this power to himself."

The case had been filed by unions representing federal employees, including the American Federation of Government Employees, as well as several cities and counties.

The CFPB case is on a separate track. The U.S. Circuit Court of Appeals for the District of Columbia has upheld a temporary injunction issued by Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia prohibiting the CFPB from firing more than 1,400 employees, leaving only about 200 employees at the agency.

Judge Jackson issued the injunction after finding that the CFPB's mass firings affected more employees than a mass layoff plan that she had attempted to enjoin earlier in the litigation.

In that case, the D.C. Circuit Court of Appeals issued a stay partially blocking the ruling, giving the Trump administration some flexibility, saying the agency could fire those employees who, after "a particularized assessment," were determined to be nonessential for CFPB operations.

The agency's assertion that it had conducted such assessments did not persuade Judge Jackson. The appeals court subsequently lifted the stay, thus re-imposing Jackson's injunction blocking the firings.

Consumer Financial Services Group

Supreme Court Allows Education Department to Fire Employees; Is CFPB Staff Next?

In another case that may not augur well for the CFPB staff, the Supreme Court is allowing the Trump administration to continue dismantling the Education Department, lifting a court order that had required the rehiring of as many as 1,400 employees, about half of the Department's employees, while a lawsuit challenging the administration's firing of those employees is pending.

In McMahon v New York, the Supreme Court issued an emergency order on July 13, 2025, that stays a preliminary injunction issued by the U.S. District Court for the District of Massachusetts that halted the firings. The Department has already sent out notices to those employees being fired.

That ruling followed a brief opinion issued on July 8 allowing the Trump administration to fire tens of thousands of workers at 21 different federal government agencies while appeals over the firings continue.

The Supreme Court majority gave no reasons for the Education Department ruling.

However, Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson dissented. They said that only Congress has the power to abolish a federal agency.

"When the Executive publicly announces its intent to break the law, and then executes on that promise, it is the Judiciary's duty to check that lawlessness, not expedite it," the three said.

The CFPB is not among the agencies involved in the Supreme Court cases, but the cases could be a harbinger about the next developments in National Treasury Employees Union v. Vought. In that case the Union is challenging an attempt by the Trump administration to fire more than 1,400 bureau employees, leaving only about 200 employees at the agency. Planned layoffs at the CFPB are held up by the U.S. Court of Appeals for the District of Columbia, which could decide any day whether to continue the delay imposed by Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia.

In the CFPB case, the D.C. Circuit Court of Appeals initially issued a stay partially blocking Judge Jackson's ruling, giving the Trump administration some flexibility, saying the agency could fire those employees who, after "a particularized assessment," were determined to be nonessential for CFPB operations. The agency's assertion that it had conducted such assessments did not persuade Judge Jackson. The appeals court subsequently lifted the stay, thus re-imposing Jackson's injunction blocking the firings.

Alan S. Kaplinsky, Richard J. Andreano, Jr., and John L. Culhane, Jr.

Congress Passes Legislation to Help Protect Veterans From Foreclosure by Reauthorizing Partial Claims With VA Home Loans

The United States Senate recently passed H.R. 1815, the VA Home Loan Program Reform Act, to reauthorize partial claims with U.S. Department of Veterans Affairs (VA) guaranteed home loans. The United States House of Representatives passed the legislation in May 2025, and the legislation now moves to President Trump for his signature.

With the sunset of a prior VA home loan partial claim program, and the more recent wind down of the Veterans Affairs Servicing Purchase (VASP) program, the enactment of the legislation is welcome news to the mortgage industry. In a press statement, the Mortgage Bankers Association's President and CEO Bob Broeksmit said that the "MBA applauds the Senate for taking swift bipartisan action to support veterans at risk of foreclosure by passing the VA Home Loan Program Reform Act. This important legislation, which passed the House in May, is a critical step forward in ensuring that distressed veteran homeowners have access to a proven and sustainable loss mitigation solution."

The legislation provides for the purchase by the VA of a portion of indebtedness under a VA home loan secured by the primary residence of the borrower that is in default or in imminent risk of default. The VA would pay to the holder of the loan the amount of indebtedness that the VA determines necessary to help prevent or resolve a default, and the VA would receive a non-interest bearing secured interest in the home that is subordinate to the first lien VA guaranteed loan. The partial claim amount would be limited to 25 percent of the unpaid principal balance of the loan on the date on which the partial claim is made. However, in the case of an individual who failed to make a payment on a loan during the period beginning on March 1, 2020, and ending on May 1, 2025, the amount of a partial claim would be limited to 30 percent of the unpaid principal balance of the loan as of the date that the initial partial claim is made.

The legislation allows for one partial claim per loan, although an additional partial claim would be allowed in the case of an individual who failed to make a payment on the loan during a major disaster declared by the President.

A partial claim will not reduce the amount of the VA guarantee on the loan.

Richard J. Andreano, Jr.

Putative Class Action Lawsuit Filed Against loanDepot Alleging Loan Originator Compensation Rule Violations

Recently, a complaint was filed against loanDepot.Com, LLC (loanDepot) in the U.S. District Court for the District of Maryland alleging violations of the Truth in Lending Act (TILA)/Regulation Z loan originator compensation rule (Rule), which applies to closed-end consumer credit transactions secured by a dwelling.

The complaint alleges that loanDepot "unlawfully steered Plaintiffs and those similarly situated to loans with higher rates and fees and further created a system for the falsification of internal forms and federal disclosures to conceal those activities." In particular, loanDepot deployed "a sophisticated, years-long scheme to systemically circumvent and conceal its willful violations of the loan officer compensation laws set forth in . . . TILA . . for the purpose of obtaining a competitive advantage over other lenders and maximizing profits at the expense of Plaintiffs and those similarly situated, all to enhance its financial performance in the months leading up to and following its Initial Public Offering (IPO)." The Rule contains three main prohibitions:

No loan originator may receive and no person may pay to a loan originator compensation in an amount that is based on a term of a covered consumer credit transaction, the terms of multiple covered consumer credit transactions by an individual loan originator, or the terms of multiple covered consumer credit transactions by multiple individual loan originators. For purposes of this prohibition, if a loan originator's compensation is based in whole or in part on a factor that is a proxy for a term of a transaction, the loan originator's compensation is based on a term of a transaction.
If any loan originator receives compensation directly from a consumer in a covered consumer credit transaction secured by a dwelling:
- No loan originator may receive compensation from any person other than the consumer in connection with the transaction; and
- No person who knows or has reason to know of the consumer-paid compensation to the loan originator (other than the consumer) may pay any compensation to a loan originator in connection with the transaction.
A loan originator shall not direct or "steer" a consumer to consummate a covered consumer credit transaction based on the fact that the originator will receive greater compensation from the creditor in that transaction than in other transactions the originator offered or could have offered to the consumer, unless the consummated transaction is in the consumer's interest. For purposes of this prohibition, an employee of a party acting as a creditor in the transaction is deemed to comply with the prohibition if they comply with the first prohibition set forth above.

In particular, the complaint alleges that:

In violation of the Dodd–Frank Act, "loanDepot linked the commission paid to loan officers to the rates and fees consumers paid."
"To conceal this illegal commission reduction scheme, loanDepot created a system of sham internal transfers, requiring loan officers who failed to push borrowers into higher rate loans to transfer (on paper only) the borrower's loan file to a purported "Internal Loan Consultant" or "ILC.""
"[T]here was no actual transfer of the loans to ILCs—the ILC assumed no additional duties—and the original loan officer continued to perform the same duties, but at a reduced commission rate."
"The only purpose of the sham transfer was to provide a false narrative that the loan officer's compensation was being reduced because of the purported transfer, as opposed to a correlation to the reduction in price, which loanDepot knew was unlawful."
"loanDepot furthered its concealment scheme by choosing to require loan officers who failed to push borrowers into higher rate loans to falsify internal documentation as to the reason for the transfer to the ILC in order to receive any commission and to obscure the reality that the transfer and corresponding commission reduction was linked to a reduction in the loan terms. "
"Further, loanDepot created transfer forms with false justifications for the transfers that loan officers had to select, and if the loan officers failed or refused to do so, loanDepot eliminated their commission altogether."

The plaintiffs will have to overcome a particular hurdle with their claims. The Rule is subject to a three-year statute of limitations, which is longer than the one-year statute of limitations that applies to most claims under TILA. Based on the allegations in the complaint, the loans that the class representatives obtained from loanDepot were originated between September 12, 2019, and June 16, 2021. Presumably the plaintiffs will argue for the tolling of the statute of limitations under a fraudulent concealment theory, which may be why the complaint includes various references to "conceal" or "concealment."

Richard J. Andreano, Jr.

HUD Rescinds Various FHA Mortgage Loan Requirements

Recently, the U.S. Department of Housing and Urban Development (HUD) rescinded various FHA mortgage loan requirements in a series of five Mortgagee Letters.

Supplemental Consumer Information Form

As previously reported, HUD announced in Mortgage Letter 2023-13 that lenders must use the Supplemental Consumer Information Form (SCIF) of Fannie Mae and Freddie Mac in connection with FHA insured mortgage loans with application dates on or after August 28, 2023. The SCIF allows the mortgage applicant to indicate their language preference, and to indicate any homeownership education or housing counseling that they have received.

In Mortgagee Letter 2025-15, HUD announced in connection with all FHA Title II single-family forward mortgage loans that it is rescinding the requirement to provide the SCIF.

In the Mortgagee Letter, HUD states:

While incorporating this form into FHA's loan application documents was intended to align FHA with industry standards, the implementation requirements and resulting impact do not justify the additional burden imposed on the Mortgagees of collecting and retaining information that they would not otherwise be required to collect and retain. In Fiscal Year 2024, only 1.2 percent of FHA Borrowers completed this form in a manner that provided any potential benefit to them.

On January 20, 2025, the President issued executive orders aimed at reversing policies that have adversely affected key sectors, including the housing market. As part of this ongoing effort, FHA is focused on eliminating policies that have increased regulatory and financial burdens, and deepened disparities in lending practices. Given the low impact and limited benefits of the SCIF, along with the additional burden and costs it creates for Mortgagees, FHA has decided to rescind this policy.

The requirement to complete the SCIF was adopted at HUD's discretion and was not required by statute. Removing this requirement is another step forward in aligning HUD policy with the administration's broader goal to reduce unnecessary regulatory burden and foster long-term economic stability for all Americans.

The provisions of the Mortgagee Letter are effective immediately.

Full-Time Direct Endorsement Underwriter Requirements

In Mortgagee Letter 2025-16, HUD announced in connection with all FHA Title II single-family forward mortgage loans and Home Equity Conversion Mortgage (HECM) loans the rescission of the requirement that FHA direct endorsement underwriters be employed on a full-time basis, thus allowing the employment of such underwriters on a part-time basis.

In the Mortgagee Letter, HUD states:

FHA recognizes that the financial landscape for smaller lending institutions has evolved significantly over the past decade, presenting both opportunities and challenges in sustaining growth and meeting customer needs.

In response to and aligning with President Donald Trump's executive actions aimed at eliminating policies that have adversely affected key business sectors, including the housing market, FHA is updating its Direct Endorsement (DE) underwriter eligibility requirements to reduce operational barriers, provide greater flexibility, and encourage participation in FHA programs. This update eliminates the full-time employment eligibility requirement for DE underwriters, permitting Mortgagees to employ them on a part-time basis. Experience requirements for DE underwriters have also been revised to accommodate part-time employment. All other aspects of FHA's policies remain unchanged.

HUD makes clear in the Mortgagee Letter that FHA mortgagees must continue to ensure their DE underwriters are permanent employees of a single mortgagee, even if only working on a part-time basis, and that underwriting functions are not contracted out.

The provisions of the Mortgagee Letter are effective immediately.

Federal Flood Risk Management Standard for New Construction Eligibility

In Mortgagee Letter 2025-17, HUD announced in connection with all FHA Title II single-family forward mortgage loans and HECM loans, the rescission of the Federal Flood Risk Management Standard (FFRMS) for new construction eligibility that was announced in Mortgagee Letter 2024-20.

In the Mortgagee Letter, HUD states:

In compliance with President Trump's Executive Order, Delivering Emergency Price Relief for American Families and Defeating the Cost-of-Living Crisis, which includes pursuing appropriate actions to lower the cost of housing and expand the housing supply, on February 21, 2025, HUD promptly issued a one-year temporary partial waiver of this burdensome flood elevation standard. Without this regulatory waiver and the associated Handbook 4000.1, the new standard would have limited the land available for development and increased the cost of construction for FHA-insured Single Family Properties, thereby contributing to the insufficient supply of New Construction housing and rising home prices.

This [Mortgagee Letter] is necessary for the duration of the waiver to restore the previously established policy and provide clarity on the current applicable standards for New Construction property eligibility and documentation requirements.

The provisions of the Mortgagee Letter are effective immediately for the duration of any waiver period applicable to these requirements.

Appraisal Protocols

In Mortgagee Letter 2025-18, HUD announced in connection with all FHA Title II single-family forward mortgage loans and HECM loans the rescission of "outdated and costly FHA appraisal requirements."

In the Mortgagee Letter, HUD states:

FHA has historically imposed more extensive property appraisal protocols and more stringent procedures than those required for other mortgage lending purposes. As a result, FHA appraisals are often perceived as significantly more complex and time-consuming and are more costly compared to conventional appraisal assignments.

Many of these requirements have remained in place despite significant evolution in industry practices and advancements in collateral risk management. Current appraisal standards no longer support the need for certain FHA-specific protocols, rendering them outdated and misaligned with broader industry norms. In addition, FHA's internal collateral valuation technology and data capabilities have significantly improved, further reducing the necessity of these duplicative and antiquated appraisal requirements.

In alignment with the administration's efforts to reduce costs and remove unnecessary regulatory burdens, [HUD] is rescinding several outdated FHA Single Family appraisal requirements. These changes represent a significant step in modernizing FHA appraisal policy, improving program accessibility, and enhancing clarity around the Appraiser's role.

Specifically, the Mortgagee Letter removes:

Economic Life/Section 223(e) (II.A.3.a.ii(I)) and renumbers subsequent sections to remove requirements for the underwriter to use the Appraiser's opinion of remaining economic life;
Photograph requirements that exceed industry standards in Photograph, Exhibits, and Map Requirements (II.D.4.a);
The remaining economic life reporting requirement in Effective Age (II.D.4.c.iii(D));
The "redundant requirement" for additional comparable sales and listings in FHA Appraisal Requirements for Market Conditions and Changing Markets – Required Analysis and Reporting (II.D.4.c.iii(F)(3)); and
Additional Appraisal Requirements for 223(e) Mortgages (II.D.8). (The citations are to HUD Handbook 4000.1)

The Handbook 4000.1 provisions modified by the Mortgagee Letter are set forth in an attachment to the Mortgagee Letter and are redlined to show the changes made.

The provisions of the Mortgagee Letter are effective immediately.

Mandatory Pre-Endorsement Inspection Requirements for Properties Located in Presidentially-Declared Major Disaster Areas

In Mortgagee Letter 2025-19, HUD announced in connection with all FHA Title II single-family forward mortgage loans that it is rescinding the requirements for mandatory pre-endorsement inspection applicable to properties located in Presidentially-Declared Major Disaster Areas (PDMDAs).

In the Mortgagee Letter, HUD states:

FHA previously required damage inspection reports prior to endorsement for all Properties located in PDMDAs. FHA also required the inspection to be completed by an FHA Roster Appraiser, which sometimes resulted in a lengthy waiting period. These requirements applied regardless of whether any damage occurred and have led to unnecessary inspections, delayed loan closings, and postponed issuance of FHA insurance. In attempts to temporarily remedy these issues, FHA has issued multiple waivers of PDMDA inspection requirements.

As detailed in Handbook 4000.1 sections III and IV, the Mortgagee is responsible for the cost of Surchargeable Damage, which includes, but is not limited to, damage to a Property caused by fire, flood, earthquake, tornado, hurricane, or Mortgagee Neglect, where the Property has suffered additional damage because of the Mortgagee's failure to take action. As such, Mortgagees have a vested interest in proactively monitoring all disaster-related property risks that may impact eligibility for FHA insurance and potential claims.

HUD advises that it is now deferring to the mortgagee's "discretion to determine the property condition and scope of inspections and repairs following a disaster event based on its own risk management practices and tolerances."

The provisions of the Mortgagee Letter are effective immediately.

Richard J. Andreano, Jr.

Federal Judge Vacates CFPB Medical Debt Rule

A Texas federal judge has voided a Biden administration CFPB rule that would have prohibited medical debt in credit reports.

"The Bureau has no such power to define what in a consumer report is 'permissible,'" Judge Sean D. Jordan of the Eastern District of Texas wrote. "Congress has defined the permissible purposes of a consumer report, and a creditor has a permissible purpose if it intends to use the report for a credit transaction."

The medical debt rule was issued by the CFPB in the closing days of the Biden administration. It would have prohibited credit reporting agencies from reporting debts even if they used codes or information to disguise the nature of the medical treatment. It also would have prohibited creditors from considering medical debt in credit reports when making credit decisions. The administration estimated that it would have removed almost $50 billion from the credit reports of almost 15 million people.

The Consumer Data Industry Association and the Cornerstone Credit Union League challenged the validity of the rule contending that it exceeds the Bureau's authority in violation of Fair Credit Reporting Act and the Administrative Procedure Act.

When the Trump administration took office, the CFPB joined the industry groups in seeking to vacate the rule. However, intervenors – two people with medical debt and two clinics that help people with related issues – sought to stop them.

The judge sided with the industry groups and vacated the rule.

"In sum, [the] FCRA expressly allows creditors to obtain and use properly coded medical-debt information in credit decisions, but the Medical Debt Rule would prohibit them from doing so," Judge Jordan wrote. "As it now recognizes, the Bureau was powerless to promulgate such a rule that flouts a federal statute by functionally rewriting it."

He concluded, that "the proposed conclusion that the Medical Debt Rule exceeds the Bureau's statutory authority is fair, adequate, and reasonable."

Dan Smith, President and CEO of the Consumer Data Industry Association said he was pleased with the decision.

"We applaud the court's decision to vacate the prior administration's medical debt rule, which prohibited including medical debt on credit reports given to creditors, meaning lenders would potentially have had an inaccurate and incomplete picture when making lending decisions," he said.

He continued, "America's financial system is the best in the world because it is based on a full, fair and accurate credit reporting system. Information about unpaid medical debts is an important element in assessing a consumer's ability to pay. This is the right outcome for protecting the integrity of the system. Our member companies remain committed to providing complete and accurate information to support lenders and help consumers access financial products."

Kristen E. Larson

Budget Bill Does Not Include Senate Proposal to Delay Section 1071 for 10 Years, but Trump Administration Again Promises Changes

The huge budget bill signed by President Trump on July 4 does not include a proposal from Senate Banking, Housing, and Urban Affairs Committee Republicans to delay implementation of the Section 1071 rule for 10 years, but the Trump administration still is expected to revise the rule.

The Section 1071 rule is a Dodd-Frank provision that requires financial institutions to report information contained in loan applications submitted by small businesses, including women-owned, minority-owned, and LGBTQI+-owned small businesses. The rule significantly expands the data reporting categories specified by Congress and has been subject to criticism from small business lenders and their representatives and members of Congress.

As originally proposed by the Senate Banking Committee, and approved by the Senate Parliamentarian, the budget bill would have delayed implementation of the rule for 10 years. The budget bill does include massive cuts in CFPB funding, but the delay provision was not included in the final bill and there has been no discussion about why it was deleted.

However, the Trump administration has promised changes to the rule. On June 18, the CFPB published in the Federal Register an Interim Final Rule that extended the Section 1071 compliance dates for all regulated entities. As a result, the earliest initial compliance date will be postponed for all regulated parties for about one year. The earliest compliance date for the highest-volume lenders is set for July 1, 2026.

And the administration and plaintiffs, in a lawsuit filed by the Revenue Based Finance Coalition, made it clear that changes will be made to the Section 1071 rule. The coalition, a trade group whose members include nonbanks that provide sales-based financing to businesses, filed a lawsuit against the CFPB in U.S. District Court for the Southern District of Florida challenging the 1071 Rule.

In a joint status report, filed July 7 in the Florida court, the CFPB and the coalition said that the extended deadlines should be sufficient for the "CFPB to issue a new proposal to reconsider certain aspects of the 2023 final rule."

The lawsuit is not the only one challenging the Section 1071 rule. Lawsuits also have been filed in federal courts in Kentucky and Texas.

Last year Congress voted to disapprove the Section 1071 rule under the Congressional Review Act (CRA), but President Biden vetoed the measure, and Congress was unable to override the veto.

Separately, on April 2, 2025, the House Financial Services Committee approved H.R. 976, which would repeal Section 1071. Under rules governing the CRA, opponents of the Section 1071 rule cannot use the CRA again to try to nullify the rule. Also, unlike measures under the CRA, which are not subject to a filibuster in the Senate, legislation to repeal Section 1071 could take 60 votes in the Senate to break a filibuster.

Richard J. Andreano, Jr. and John L. Culhane, Jr.

Jonathan Gould Confirmed as Comptroller of the Currency

The Senate has confirmed Jonathan Gould as Comptroller of the Currency.

Gould, who served as Senior Deputy Comptroller and Chief Counsel at the OCC during President Trump's first term, was confirmed 50-45. Every Democrat voted against the nomination.

He replaces Rodney Hood, who was Acting Comptroller, after being selected by Trump to serve in that role.

Gould has served in several positions at the Senate Banking, Housing, and Urban Affairs Committee, including as Chief Counsel under former Chairman Senator Mike Crapo, (R-Id.).

Most recently, he has been a partner at Jones Day. Prior to that, he served as chief legal officer at Bitfury, a crypto mining company. He also has been a corporate counsel or a consultant at BlackRock and Promontory Financial Group.

He holds a bachelor's degree from Princeton University and a law degree from Washington and Lee University.

During his March confirmation hearing, Gould called the national banking system "one of the crown jewels of American Finance."

He said that if banks are to serve in their role supporting the United States economy, they must be allowed to engage in "prudent risk-taking."

He added, "But in the years since 2008, bank regulators have at times tried to eliminate rather than manage risk, frustrating the ability of banks to fulfill their function. This blinkered approach to risk management has implications for the cost and availability of credit, the system's ability to absorb shocks, and its adoption of new technologies and embrace of innovation."

He also said he will "shine a spotlight" on debanking.

Crapo said he believes that Gould is well-suited for the position. "I am confident in his ability to carry out the agency's critical mission to ensure the safety and soundness of our banking system, and to ensure banks provide fair access to financial services," Crapo said.

However, Senate Banking Committee Ranking Democrat Senator Elizabeth Warren, (D-Mass.), in a March letter to Gould expressed concern about the nomination.

"Your record as Chief Counsel at the OCC during the first Trump administration raises concerns that, if confirmed, you may pursue a Wall Street deregulatory agenda, block states from exercising their rights to protect their citizens from predatory practices by national banks, and let large banks off the hook when they violate the law," Warren wrote.

On the other hand, Rob Nichols, President and CEO of the American Bankers Association, said he was pleased with Gould's confirmation.

"We look forward to working with Comptroller Gould on a number of important regulatory issues in the years ahead, including advancing a rational regulatory framework that promotes a resilient and healthy national banking system and upholding the OCC's commitment to national bank preemption," he said.

Mortgage Bankers Association President and CEO Bob Broeksmit also applauded the confirmation.

"Jonathan Gould's distinguished résumé in both the private and public sector will serve him well as Comptroller of the Currency," he said.

Consumer Financial Services Group

Are You Ready for an NLRB Quorum? It May Be Coming!

On July 17, 2025, the White House sent a series of nominations to the Senate, including nominations for two National Labor Relations Board members – Scott Mayer and James Murphy. If confirmed, the nominees would join sitting Board Members Marvin E. Kaplan (Chair) and David Prouty, to create a quorum at the Board for the first time in almost six months.

The Board, a quasi-judicial body, has five seats, but three members are necessary for a quorum. The Board has lacked a quorum since January, when President Trump dismissed Democratic member Gwynne Wilcox. Wilcox has challenged her removal, and most recently, the U.S. Supreme Court blocked a lower court's order to reinstate her. The central issue in Wilcox's case is whether the President has the authority to fire employees at independent agencies without cause.

Board Members are appointed by the President, with the consent of the Senate, to five-year terms with staggered expiration dates. Mayer is nominated to fill former Member Lauren McFerran's seat, and Murphy is nominated to fill former Member John Ring's seat. Mayer's term would expire on December 16, 2029, and Murphy's on December 16, 2027. If approved by the Senate, the Board would be comprised of three Republican members, with Prouty as the sole Democrat.

This week, the Senate also held confirmation hearings for President Trump's General Counsel nominee, Crystal Carey. The General Counsel is independent from the Board and is responsible for investigation and prosecution of unfair labor practice cases and the supervision of the NLRB's field offices. Currently, Trump administration appointee, William B. Cowen, is serving as Acting General Counsel.

If the General Counsel and Board nominees are approved, employers should expect to see a reversal of many Biden-era, union-friendly NLRB decisions in the coming months.

About the Nominees

Scott Mayer is a Philadelphia-based labor lawyer who currently serves as Chief Labor Counsel for a major aerospace company, where he oversees legal matters related to labor relations and compliance. Mayer has a strong background in labor relations, including arbitration, collective bargaining, and conflict resolution. He is a graduate of Villanova Law School and Cornell University.

Jim Murphy has reportedly served on the staffs of dozens of Board members throughout the years and was most recently Member Marvin Kaplan's chief counsel.

Rebecca A. Leaf and Brian D. Pedrow

Federal Judge Rules That Firing of Rebecca Slaughter as FTC Commissioner Was Illegal

A federal judge has ruled that the President Trump violated federal law when he fired Rebecca Slaughter, a Democrat, as a member of the FTC.

"Ms. Slaughter remains a rightful member of the Federal Trade Commission until the expiration of her Senate-confirmed term on September 25, 2029, ... and ... she may only be removed by the President for 'inefficiency, neglect of duty, or malfeasance in office,'" Judge Loren AliKhan, of the U.S. District Court for the District of Columbia, ruled.

She wrote that, "Congress made a deliberate choice to build the FTC as an independent agency, comprised of a 'multimember body of experts, balanced along partisan lines,' to protect the American population from unfair, deceptive, and exploitive business practices."

Alvaro Bedoya and Rebecca Slaughter were dismissed from the FTC without cause. They filed suit, contending that their dismissals were illegal since the FTC is supposed to be an independent agency. They said that President Trump's decision was in direct violation of federal law and Supreme Court precedent.

Bedoya resigned before he potentially could be reinstated, so Judge AliKhan ruled that his claim was moot.

Slaughter and Bedoya had said that FTC members are protected by the 1935 decision of the Supreme Court in Humphrey's Executor v United States, which upheld the constitutionality of the for-cause removal standard applicable to FTC commissioners.

The judge agreed.

"These facts almost identically mirror those of Humphrey's Executor," she wrote.

She said that in Humphrey's, the Supreme Court ruled that the FTC Act's for-cause removal protections were Constitutional.

"In arguing for a different result, [the administration asks] this court to ignore the letter of Humphrey's Executor and embrace the critiques from its detractors," the Judge wrote.

She said that the administration hopes that she will overrule a 90-year-old, unanimous binding precedent.

"Humphrey's Executor remains good law today," she wrote. "Over the span of ninety years, the Supreme Court has declined to revisit or overrule it."

"Humphrey's Executor remains binding on this court," she concluded.

The district court entered summary judgment in favor of Slaughter. Notwithstanding the court's steadfast reliance on Humphrey's Executor, such reliance may not carry the day. The court's ruling contrasts with an earlier case in which President Trump had fired without cause Democratic members of the National Labor Relations Board and the Merit Systems Protection Board. After the district court granted a preliminary injunction reinstating those members and the Court of Appeals denied a request to stay the preliminary injunction reinstating those, the Supreme Court, by a 6-3 majority, granted the stay. Significantly, in doing so, the Supreme Court cast doubt on the continued viability of the Humphrey's Executor opinion as we explained in our earlier blog.

As a result of this Supreme Court opinion, it is premature for Slaughter to celebrate her reinstatement since the Government has already appealed the case to (and sought a stay of the district court's order from) the Court of Appeals. If the Court of Appeals refuses to grant such a stay, it seems likely that the Supreme Court will grant a stay based on the logic of the Supreme Court's opinion in the NLRB case.

Consumer Financial Services Group

Looking Ahead

New Consumer Financial Services Fintech Business Opportunities Arising From Deregulation at the CFPB

A Ballard Spahr Webinar | August 12, 2025, 12 PM ET

Speakers: Alan S. Kaplinsky, John L. Culhane, Jr., Kristen Larson, Joseph J. Schuster, John D. Socknat, and Ronald K. Vaske

The Supreme Court's Landmark Ruling on Universal Injunctions in the Birthright Citizenship Cases

A Ballard Spahr Webinar | August 13, 2025, 12 PM ET

Speakers: Alan S. Kaplinsky and Burt M. Rublin

MBA – Compliance and Rick Management Conference

September 28-30, 2025 | Grand Hyatt, Washington, D.C.

COMPLIANCE CONVERSATIONS TRACK: Loan Originator Compensation

September 28, 2025 – 2:15 PM ET

Speaker: Richard J. Andreano, Jr.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mortgage Banking Update - July 24, 2025

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