With the declining relevance of landmark Dodd-Frank consumer protections, shrinking federal oversight and a hamstrung housing finance market, the rules intended to safeguard industry stakeholders after the 2008 financial crisis may now be the reason it is vulnerable again — at the very moment that state regulators have been forced to go it alone.
Long-time mortgage experts warn that the legacy of the Dodd-Frank Wall Street Reform and Consumer Protection Act is increasingly out of step with the reality it helped create.
“The regulatory framework built post-Dodd Frank is not designed to support the nonbank lenders and servicers dominating the market now,” said Meg Burns, executive vice president of the Housing Policy Council (HPC), an influential industry association whose member companies include some of the nation’s largest mortgage originators, lenders, servicers and insurers. “We need to stop saying this is an issue and actually step up to build a new regulatory framework.”
Burns was among those addressing state banking commissioners and mortgage regulators last Tuesday at a one-day policy summit at the National Press Club in Washington, D.C. The event was co-hosted by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR).
Against the backdrop of the Trump administration’s overhaul of national trade policy and gutting of federal agencies, the summit convened many of the nation’s foremost housing finance experts, attorneys and policy wonks who, absent robust federal supervision and enforcement, will be relied upon to maintain stability and an even playing field.
“Since the Great Financial Crisis we have not gotten the risk management piece right,” Burns said. Before joining the HPC in 2017, she spent 25 years in senior roles at federal housing agencies, including as director of the Office of Single Family Program Development at the Department of Housing and Urban Development (HUD) and as a senior associate director in the Federal Housing Finance Agency’s Office of Housing and Regulatory Policy. “Do current programs actually reduce the severity of losses to the credit risk holder?” She’s not sure they do.
Legacy Protections A Growing Liability
Fifteen years after the passage of the Dodd-Frank Act, the rules designed to restore confidence in a housing finance system that had not only failed unwitting American taxpayers but the savviest of global investors no longer appear relevant. Stricter capital requirements and risk retention rules developed post-crisis to preempt future catastrophes effectively shunted most banks — the depository lenders that once dominated mortgage lending — out of the market.
Filling the void, non-depositories and fintechs (“nonbanks”) have captured 60-70% of market share since 2020 while originating roughly 90% of riskier government-backed mortgages. State regulators, through state departments of financial institutions and state banking departments, serve as the primary prudential regulators for nonbanks, responsible for coordinating licensing, supervisory and enforcement activities within their boundaries.
“We don’t have a single plan for how we get out of a single major failure of a major nonbank lender or servicer,” warned Diane Thompson, deputy director and chief advocacy officer of the National Consumer Law Center. Thompson, who, until February, had served as senior adviser to the CFPB director, observed that “our framework isn’t set up for this economic environment. If they fail, the mortgage market fails.”
The summit’s discussions made one thing abundantly clear: regulatory inaction is no longer a neutral stance. “What does loss mitigation look like across a range of economic circumstances?” Thompson asked. “We don’t know.” From the bond-holders to the homeowners, the housing finance system appears, once again, exposed.
In wide-ranging discussions, banking commissioners and mortgage regulators emphasized numerous urgent challenges facing regional and national mortgage markets, from threatened labor markets, rising underinsurability and home supply shortages to the lack of recovery and resolution frameworks for nonbank failures. Also front of mind: the much-anticipated release of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, from federal conservatorship.
‘The Future Of Mortgage Policy’
The summit’s first question was addressed to Danielle Hale, chief economist of Realtor.com.
“How about that Moody’s downgrade?” asked Tony Salazar, Maryland Commissioner of Financial Regulation and newly elected Chair of the CSBS Board of Directors. “An additional vote for concern for the United States’s fiscal situation,” Hale replied, noting the “inopportune timing” given housing’s seasonality. “It’s not going to make it easier for buyers and sellers.”
Bigger picture, the downgrade risks “continuation of the Sell America trade,” she added.
“The discussion at the MBA about GSE release is about the viability of the 30-year mortgage in the U.S.,” said Justin Wiseman, vice president and Managing Regulatory Counsel at the Mortgage Bankers Association (MBA), responding to Salazar’s question about ending GSE conservatorship. “Releasing the GSEs with a wink won’t work,” Wiseman added, underscoring the crisis of regulatory relevance facing mortgage regulators.
The 30-year, fixed-rate mortgage has dominated U.S. mortgage markets for more than half a century, comprising 70% of all residential originations in 2021, according to Home Mortgage Disclosure Act data. Global financial markets feed on U.S. mortgage bonds primarily backed by 30-year, fixed-rate home loans because U.S. homeowners always, or almost always, pay their mortgages.
A series of challenges present what numerous attendees described as “a perfect storm” to drive a mortgage downturn, however: delinquencies among government borrowers rising, homeowners insurance markets teetering, and Trump administration trade policies driving investors to reassess the safe-haven status of U.S. Treasury markets. All of which underscores the unintended consequences of the post-crisis regulatory response.
“We did a great job making loans more secure, but not institutions,” acknowledged Peter Carroll, executive vice president of public policy and industry relations for Cotality (formerly CoreLogic), a property analytics and real estate market intelligence firm. Delinquencies due to natural disasters are “16x more expensive to process” than garden variety hardships, he explained, outlining the critical function of nonbank mortgage servicers at the intersection of escalating natural disasters and fragile homeowners insurance markets.
At the end of 2024, “real mortgage payments” had risen 62% above pre-pandemic levels, Cotality data shows. Projections show property tax and home insurance costs exceeding the principal and interest portion of monthly mortgage payments on nearly 9% of all mortgages in 2025.
“I’m pretty worried about delinquencies,” Carroll said, citing affordability barriers, the potential for an economic slowdown and commensurate job losses. “Nonbank lenders and servicers play a systemic role. There is no framework for resolution if a mega-nonbank fails.”
Worsening the ramifications from such a failure the rapid consolidation and vertical integration among the industry’s largest mortgage lenders and servicers — detailed at length in the Financial Stability Oversight Council’s 2024 Report On Nonbank Mortgage Servicers. Nonbanks dominating today’s market have not weathered a sustained economic downturn.
Three years of challenging profitability post-pandemic have hastened consolidation among the nation’s largest mortgage lenders.
The top-five lenders, all nonbanks, originated 29% of all residential mortgages in 2024, up from 24% in 2022, according to Inside Mortgage Finance. The top-10 lenders accounted for 42% of originations in 2024, up from 36% in 2022.
Networked Supervision Confronts Federal Retreat
In an afternoon keynote address that several attendees described as heavy on enthusiasm but light on specifics, the Secretary of the U.S. Department of Housing and Urban Development (HUD), Scott Turner, hammered home the federal government’s anti-regulator approach to consumer protection and affordable housing challenges to the roomful of regulators.
Turner applauded what he described as the new “mission-minded” approach of his department.
“Those that came before lost sight of the mission,” he said, explaining how “solutions don’t come from Washington” in his department’s pursuit of housing affordability and housing abundance. “One of the most impactful initiatives we have right now is deregulation. We’re taking rules down. We’re taking regulations down.” He cited HUD’s termination of the Biden-era Affirmatively Furthering Fair Housing (AFFH) rule as an example of its progress.
In a brief Q&A session following Turner’s remarks, the director of the Indiana Department of Financial Institutions, Tom Fite, directly asked Turner if there were any areas where state financial regulators could partner with HUD to improve stability or economic opportunities. Turner’s response did not identify an area where states and HUD could partner, however.
As federal regulatory bodies led by Trump appointees narrow the scope of their rulemaking, supervisory and enforcement activities, “states are still here,” said Kirsten Anderson, Deputy Administrator for the Oregon Division of Financial Regulation and president of AARMR. “We’ve always been here. We have not changed.”
What has changed, though, are the stakes — the puzzle that a constantly evolving economic, financial, and political landscape forces state regulators to solve.
“The conversation is switching over from attaining homeownership to retaining homeownership,” Anderson continued, echoing others’ concerns about economic instability and rising long-term costs of homeownership making sustainable homeownership difficult. “Loss mitigation is a topic we’re going to be talking a lot more about in the upcoming years.”
The mortgage market of 2025 bears little resemblance to the one Dodd-Frank was designed to safeguard in 2010. The market of the “upcoming years” will bear even less as home insurance markets destabilize, digital currencies gain favor, and AI evolves to upend origination, servicing, and capital markets execution — hastening consolidation and turbo-charging risk while promising to revolutionize the mechanisms by which regulators can facilitate compliance.
At the very moment historic risks are converging, what emerged as consensus among state regulators last Tuesday was not whether regulatory reform is needed, but how to maintain market stability as it does.
