The consumer watchdog sent five rules to the Office of Management and Budget for review on June 4. Rules on the queue include the Loan Originator Compensation Requirements under the Truth in Lending Act and discretionary servicing rules under the Real Estate Settlement and TILA.

The publicly available information on the Office of Information and Regulatory Affairs regarding the LO comp has a note of "rescission." Meanwhile, the servicing rules under RESPA and TILA are described as "discretionary" hinting that only some parts may be slashed.

Details regarding what exact changes the CFPB is seeking remain sparse, with the bureau not responding to a request for comment Friday. Inside Mortgage Finance first reported on the development.For years, the mortgage industry has been calling on the CFPB to make changes to the LO comp rule in favor of better protections for consumers and less regulatory burdens for lenders.

The rule, originally implemented to prevent steering, has been criticized for disenfranchising lower-to-moderate income buyers by making certain products financially unprofitable for mortgage lenders to offer. Additionally, the industry, specifically mortgage lenders, have wanted to be able to reduce LO comp when an originator makes a costly mistake.

Bill Dallas, industry veteran, noted that if changes to LO comp were done properly, it could make mortgage lending "much more profitable." 

"It is a mess today and it doesn't make sense to have salespeople selling varying products at the same comp," he said. "Reverse is different from an interest-only loan, which is different from non-agency, FHA, etc. They all have different values and different structures."

Dallas also noted getting out of the shackles of the LO comp rule would allow lenders to pay their top talent more if they wanted to.

Updates to the LO comp was one of the first items the industry was hoping the administration would address, but if it is completely rescinded that could create mayhem, some say.

Richard Horn, co-managing partner of Garris Horn LLP, thinks axing the rule "would make the industry nervous." Horn points out if the rule is rescinded, it could actually limit consumer choice and raise interest rates.

"The borrower potentially wont be able to pay points and fees upfront to the lender," he added. "You have to just have a higher interest rate. The creditor is going to make up those costs somehow."

Regarding servicing regulations, stakeholders expressed hope for modernization ahead of the new administration taking office — particularly around loss mitigation requirements.

"The title of those two servicing rules that were listed says 'discretionary.' I think this is a signal of what they will be rescinding," Horn said. "A lot of the mortgage servicing rules were required by TILA and RESPA mandates, but a lot of it wasn't — it was just the CFPB deciding to do it on their own. I've been saying that for years, like the loss mitigation provisions were entirely discretionary, and so they're really at risk of being challenged."

Late last year, the CFPB under the Biden administration proposed new servicing rules, which included a limit on fees servicers could charge borrowers during reviews. In response, lawmakers have critiqued the rule, noting they will increase operational costs for companies.

"At the end of the day all that mortgage lenders want is a CFPB that's functioning," noted Horn. "And just more reasonable than the CFPB under former Director Chopra."