The interplay between federal and state regulation: The practical impact
 | Paul Gigliotti CEO California MBA |
 | Courtenay R. Dunn Senior Director of Government Affairs ICE |
 | Sarah Wheeler Editor in Chief HousingWire |
Overview
When the Trump administration went after the CFPB last year, many in housing cheered, but in some ways the compliance picture just got more complicated. States have predictably stepped up their rules and enforcement over the last year, while some federal requirements remain in place.
The relationship between state and federal regulation is important to understand, especially for its practical and operational impact.
This session dives into:
- Which states are driving regulation and what to expect next
- Who will be regulating new digital assets like crypto
- Operational impact of overlapping federal/state regulation
Session Notes
- Key Takeaway: Rapid shifts at the federal level—particularly around CFPB enforcement—are pushing regulatory complexity downstream to the states, creating a layered and often conflicting compliance environment. The panel emphasized that regulation now functions less as a political issue and more as an operational and strategic risk that directly affects credit availability, pricing, and speed to market.
- Pullbacks in federal enforcement create hidden operational gaps. Even when oversight is reduced, agencies like the CFPB provide essential benchmarks (e.g., APOR) embedded across federal and state statutes, meaning disruption can unintentionally complicate compliance and pricing.
- States are actively filling the regulatory vacuum. California, in particular, is expanding oversight through DFPI authority and new legislation, layering additional requirements on top of existing federal rules rather than replacing them.
- Conflicting federal and state rules increase execution risk. Proposed federal actions—such as OCC guidance on escrow interest—can directly clash with state laws, leaving lenders uncertain about which standards apply by entity type and geography.
- Overly prescriptive regulation can suppress capital. Past efforts like Reg AB II show how well-intentioned transparency rules can unintentionally limit private capital flows by making compliance impractical.
- AI and automated underwriting are emerging flashpoints. State-level bills aimed at “algorithmic bias” often misunderstand how underwriting systems work, creating compliance risk despite strong performance by IMBs in serving LMI and diverse borrowers.
- Trade associations play a critical role in clarity. Early engagement and education of lawmakers through national and state associations remains the most effective way to shape workable regulation and avoid fragmented rules.
- Leadership Lens: Housing leaders should treat regulation as a forward-looking strategic input, not a last-mile compliance task. Success in 2026 will depend on early monitoring of state activity, close coordination with vendors and associations, and investing ahead of rule changes to avoid operational disruption, litigation risk, and lost lending capacity.
