Mortgage Fraud Risk Rises, as White House Moves to Banish the Watchdog

Mortgage applications with signs of fraud have increased more than 8% since this time last year. The news comes from the property analytics firm Cotality. The firm runs algorithms through applications, pinpoints possible fraud, and maintains the National Mortgage Application Fraud Risk Index.

Cotality notes that real estate fraud rises as more investors take out multiple mortgages — sometimes on the same properties — with multiple lenders. And this year’s statistics show about a third of home sales going to investor-buyers.

Curtains for the Consumer Financial Protection Bureau?

The Consumer Financial Protection Bureau does what its name suggests. It monitors corporate behavior, and supports customers’ rights in the lending world. It’s a watchdog for fraud or abusive practices that can push regular buyers into financial trouble.

The head of the White House Office of Management and Budget, Russell Vought, has also become the acting director of the CFPB. Through Vought, the Trump administration is bent on dismantling the CFPB.

The core staff continues to deal with complaints about unfair practices, engage in rulemaking, and handle other routine work — perhaps until the agency is completely shuttered. That could happen soon. In early 2026, the CFPB will run out of its current funding. And the Department of Justice has submitted court filings meant to block the Federal Reserve from continuing to fund the CFPB.

The agency came into being nearly 15 years ago, in the wake of a massive mortgage crisis. The Dodd-Frank Act (see the law’s key provisions here) set up the CFPB to enforce financial laws — particularly laws created to prevent mortgage fraud.

The CFPB was also established to reconcile banking law and policy among states. It created standardized, predictable responses to fraud and unfairness.

Who Will Lead if the CFPB Can’t?

Federally, mortgage fraud is monitored by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and conventional loan-backers Fannie Mae and Freddie Mac.

As for consumer protection, and the interpretation of mortgage fraud laws, much will fall to the states. You might ask: Is that so terrible? Aren’t state-level financial agencies the main regulators of mortgage companies in any case?

Yes, but states’ ability to confront mortgage fraud is limited. While states do regulate lenders, they lack the consumer-protection powers that the CFPB had.

Why This Matters to Homeowners

Rising mortgage fraud doesn’t just affect lenders or investors. It can directly impact everyday home buyers through higher borrowing costs, delayed closings, unfair denials, and fewer protections if something goes wrong. Without a strong federal watchdog, consumers may have less recourse when facing deceptive loan terms, data errors, or algorithm-driven denials they don’t understand.

Where would the impact of a permanent CFPB shutdown hit hardest? Perhaps in the states with the biggest increases in indicators of mortgage fraud risk. According to Cotality’s risk index, these include:

• Ohio, where Cotality’s latest report shows fraud indicators are up 55%.

• Delaware: up 41%.

• Vermont and Kansas: both up 35%.

• Oklahoma: up 33%.

The Cotality study went through millions of mortgage applications to produce these figures.

What Else Do We Stand to Lose?

A very timely question. Readers interested in acquiring a deed might like to visit the CFPB website and download some of its helpful guides while they are still available. The agency’s Know Before You Owe materials walk hopeful home buyers through the process of getting a mortgage and working with the lending company.  

Currently, the site’s visitors can view checklists that demystify the mortgage-seeking journey, including:

• A sample loan estimate. See the details of the mortgage agreement you’ll sign, and the associated charges. Check the interest rate, terms, potential penalties for early payments, and everything the mortgage consultant is telling you you’re going to get. This document is an excellent aid for anyone shopping for a mortgage.
• A sample closing disclosure. Before closing day, compare this to your original loan estimate, and be sure what you saw is what you’ll get. You should receive the disclosure at least three business days in advance of closing. Examine it with care. You’ll be allowed to back out of the closing if you see something amiss. Or you might simply ask questions and get clarifications.

Posting these documents is a very handy service from the CFPB. No matter how mortgage-savvy a buyer might be, it’s always helpful to go over the checklists and worksheets, budget forms, and even samples of effective discussions between applicants and lenders. Before the CFPB developed these materials in 2015, there were four disclosure forms that lenders distributed to their customers. Those were not so user-friendly. Now, lenders can distribute the CFPB’s Home Loan Toolkit (PDF). It offers clear explanations so home buyers can understand the mortgage disclosures they receive.

In the Era of Machine-Driven Decisions, the CFPB Is a Force for Fairness

As a federal agency, the CFPB has dedicated itself to ensuring fair deals for everyone. Its employees held banks and non-bank lenders responsible to treat people fairly. Now, when fraud appears to be on the rise, the administration’s urge to shut down a fraud-fighting agency does not bode well.

But there’s yet another big reason the destruction of this agency will hurt consumers. And that’s the murky quality of some companies’ uses of algorithms to issue decisions that can have life-changing effects.

About two years ago, the CFPB published guidelines for the use of algorithms by financial professionals. Ethical guidance on artificial intelligence (AI) forms a key part of these guidelines. The CFPB laid out how lenders need to act in keeping with the federal Equal Credit Opportunity Act. That federal law, for example, says lenders must produce the detailed findings that went into turning any loan applicant down. “This requirement remains even if those companies use complex algorithms and black-box credit models,” wrote the CFPB. Lenders can’t just put software to work and assume they have no professional responsibility for the results the algorithms spit out.

The CFPB also stepped up to ensure that lenders aren’t letting new AI software tools disadvantage minority applicants through digital discrimination.

Borrowers need to be able to understand that decisions on approvals are fair and really do reflect what’s relevant: their ability to repay the loan. If the decision is negative, applicants need to know how to remedy the situation, perhaps by improving their credit profiles. The trust that borrowers deserve to have depends on transparency in the lending profession. No matter what our political leanings may be, we can all agree that the industry thrives best where transparency and financial safety are valued.

For all of the above reasons, the dismantling of the Consumer Financial Protection Bureau is a cause for serious concern. At Deeds.com, we’ll keep you posted.

How Home Buyers Can Protect Themselves If the CFPB Is Weakened

If federal oversight fades, home buyers will need to be more proactive when navigating the mortgage process. Here are practical steps consumers can take to reduce risk:

• Review loan documents line by line.
Compare loan estimates and closing disclosures carefully. Small changes in fees, interest rates, or loan terms can add up over time.

• Ask for written explanations.
If a lender denies your application or changes your terms, request a written breakdown of the decision. Lenders are still legally required to explain adverse actions.

• Shop multiple lenders.
Comparing offers remains one of the strongest defenses against unfavorable or misleading loan terms.

• Monitor your credit closely.
Errors in credit reports can trigger automated denials. Review reports from all three major bureaus before applying for a mortgage.

• Use reputable, transparent lenders.
Look for lenders with clear disclosures, responsive customer service, and a documented complaint history you can review through state regulators or public records.

• Save official CFPB materials while available.
Guides like Know Before You Owe and the Home Loan Toolkit remain valuable resources for understanding mortgage disclosures and borrower rights.

Important note: This and other articles on Deeds.com are intended to provide general information, not legal analysis or advice.