For those tracking servicing regulation and compliance, Consumer Financial Protection Bureau cutbacks have pushed attention toward agencies like the Federal Housing Administration, whose distressed loan rules are likely to shape servicing priorities in 2026.  

"There's really not a lot going on with the CFPB," said Donna Schmidt, president and CEO of DLS Servicing. "The spread between FHA delinquencies and other delinquencies is growing over historical figures."

Schmidt, a distressed loan specialist, said servicers also will be looking for more direction from agencies like the Department of Veteran Affairs on rules like its new partial claim relief given constant signals that broader loan performance is experiencing some pressure.

How FHA stress and policy changes shape federal focus

Home equity levels remain high and distress is low for mortgages overall, but given the softening housing market and upward creep in consumer bankruptcies, FHA compliance could be the priority in 2026. Redefault rules in particular may call for more attention.

"People are finally running out of their FHA partial-claim statutory limit," Schmidt said. 

Approved FHA short sales are running into some challenges getting sold where the housing market is softer and the industry is hoping for a policy response to this, she added.                                                                                                                                                                                                                                                                                                                                                           With the Senate having finally confirmed a group of federal nominees that includes leaders at the FHA, Ginnie Mae and bank regulators, servicers also will be watching for rulemaking or deregulation in areas that include reverse mortgage securitization and capital requirements.

Plans to allow GSE loan applicants to count crypto holdings toward qualifying reserves could lead to new mortgage servicing rules. A trigger leads ban that affects servicing retention is also set to take effect in 2026.    

Confirmed federal deregulation like the recent waiver of language that caused confusion about timing around the date of default at FHA has been helpful, and the industry is still waiting to hear about other proposals they hope for more progress on in 2026. One measure Schmidt would like more follow up or closure on is the CFPB's proposed revision of Reg X, which would roll back the last remaining pandemic-era servicing flexibility that was added in 202.    

The state outlook for servicing rules, regs and enforcement

Schmidt said state regulators have not stepped in as aggressively as the industry once feared following the CFPB's pullback, though activity has picked up in several historically active states.

To name a few: Massachusetts recently settled legacy allegations related to foreclosure procedures with a servicer, and California has added requirements around zombie second liens and wildfire forbearance. In addition, recent rulings on New York's Foreclosure Abuse Prevention Act are putting pressure on servicers.

Legal risks related to FAPA are something servicers should prepare for going into 2026, according to Adam Swanson, a financial services litigation and bankruptcy partner at McCarter & English.

The recent rulings that affect Fannie Mae, Freddie Mac and private loans indicate the clock on the statute of limitations will start ticking if any of the related parties initiate a foreclosure lawsuit, even if they don't hold the note and have standing at the time. That makes ensuring standing is in place at the outset important.

"Servicers and foreclosure counsel are going to be required to give flawless execution and that's going to drive the cost of a default higher," Swanson said. "Those costs have to be priced into how much a loan will be purchased for on the secondary market, and that impacts, ultimately, the rate that a private lender is willing to give when the loan is originated."

The law's tight timeline also could make servicers think twice about giving borrowers any more leeway on payments than they're required to for affected loans. The GSEs do have borrower assistance rules, but the private market has none unless required by their investors.

New York is a financial center, so many mortgages are bound by its laws. FAPA also is a particular concern in the secondary market. Securitization further complicates the question of which of multiple entities involved holds the note and has standing. 

While using electronic notes may be helpful in that they may ease tracking, Swanson said their legal context is less established than their traditional counterparts' and keeps evolving through court interpretations of the Uniform Commercial Code and Uniform Electronic Transactions Act.

"The whole concept of being in possession of the promissory note is replaced by a new concept of being in control of the authoritative copy of the electronic record," Swanson said. "What happens under the e-note regime is that Article 3 of the UCC, which concerns negotiable instruments, is almost entirely supplanted by a new area of law."

A slow rise in the number of foreclosure starts and a newer industry registry added last year, servicers may want to keep a close eye on how the courts in various jurisdictions interpret the legal standing of e-notes in 2026.

Local registration requirements could spread further

Requirements for local registrations of vacant, foreclosed or real-estate owned properties also could grow in 2026, according to Mike McClelland, chief operating officer at Rocktop Technologies, which partners with a compliance services provider in this area called Bron.

Likely drivers of more increased registration requirements include the aforementioned creep upward in consumer bankruptcies, which at the time of this writing in late 2025 totaled 533,337 for the year, compared to 481,350 for 2024, according to court data.

Also potentially contributing is what has generally been a decrease in federal support to other levels of government, which has created a greater local and state need for sources of revenue. 

"More municipalities are starting to awaken to the idea of such a thing as a registration fee for various property statuses," McClelland said.

The registration requirements initially spread in response to the Great Financial Crisis that forced the GSEs into federal conservatorship in 2008 as local governments sought to keep track of the distressed properties that proliferated in the housing crash's wake.

"This becomes a very useful tool for the code enforcement groups within the municipalities to know which properties need to be watched to make sure that the rules and regulations are being followed, whether it relates to grass-cutting, blight or damage," McClelland said.

Local governments don't have a common registry and typically charge fees for the registrations and penalties for noncompliance, which may add to costs in a market where forecasts call for lower rates that could make business conditions somewhat more challenging for servicing.

Around 10% of the 35,000 municipalities have registration requirements with fees generally in the $200-$500 range, McClellan said. This affects around 30% of properties in the United States.

Fines can vary. Los Angeles issues a $250 daily fine for noncompliance up to a maximum of $100,000. Parts of a Miami-Dade County ordinance related to property registration charges call for fines as high as $500 or $5,000 plus an administrative fee.

Tracking and automating compliance in this area has been challenging because registration in decentralized and technology adoption at the local level can vary.

"It's 50/50 whether they allow you to do online registration or have to mail in a check, but even in that case, we're looking to take advantage of technology to improve some of our processes," McClellan said.