How The CFPB Ending Increases Risk For NonQM Lending: And Here's How To Solve It

How The CFPB Ending Increases Risk For NonQM Lending: How To Solve It

By: Danny Flucke (IRS License #P03287366 / A.F.S.P. / CTEC / NMLS #331548)

17OCT25

The Consumer Financial Protection Bureau (CFPB) faces a bleak future. Whether through defunding, restructuring, or outright dissolution, its centralized enforcement role will soon be scattered across state agencies.

For the NonQM mortgage industry this isn’t just a regulatory shake-up. It’s a seismic shift exposing lenders to inconsistent state by state standards, possible “selective” and aggressive enforcement, excessive defense and appeal costs, and reputational brand risk.

What Has Happened to the CFPB Already?

Budget Director Russell Vought stated he intended to close the agency within the next three months. “We don’t have anyone working there except our Republican appointees and a few careers that are doing statutory responsibilities while we close down the agency,” Vought said on Wed, Oct 15th, while being interviewed on the Charlie Kirk Show.

The CFPB staff numbered over 1600 in late 2024, and is now down to about 200 employees. (Source: HousingWire. Link below)

State Overreach Is Coming. Are You Ready?

When the CFPB steps back, state regulators will step in. But unlike the CFPB’s published guidance and enforcement, state agencies operate with varying procedural agendas.

A loan file deemed compliant in one state could trigger scrutiny in another. For NonQM lenders, this creates a minefield of exposure, especially when income verification, self-employment documentation, and/or NonQM verifications become the focal point.

Your NonQM Verification Vendor Is Now Your Firewall Against Risk

At USTaxCerts.com, we’ve built our verification solutions to do more than just help processors and underwriters easily check off the conditions. Our systems are “over-compliant” and designed to withstand scrutiny from any regulator, in any state.

The backend evidence files include audit-grade documentation, and are backed by credentialed professionals who understand NonQM lending and compliance risk.

In a post-CFPB world, your NonQM verification vendor isn’t just a service provider. They are your first line of defense against fragmented oversight and state-level overreach.

Are you REALLY Going to Trust Just Any Tax Firm?

Letting your borrower use their own tax firm may sound easier, but in reality, you are exposing yourself to multiple layers of risk: (Hint: You should require all tax professionals to submit their license information and proof of attestation E&O insurance with every file.)

1) Is the file protected specifically by attestation and/or business background liability insurance? Our orders are covered for up to $1M per file to cover losses sustained by the borrower, lender, and lender employees and contractors.

2) Is the file protected from the legal defense costs? Our orders are covered against legal fees associated with any actions against USTaxCerts, borrowers, lenders, and lender employees and contractors.

3) The IRS licensing information, proof of attestation insurance, and proof of legal defense coverage should be required on every file. It may not be included in the final loan package, but all this critical information should be retained at the lender level for future reference if required.

Prepare Your Production and Operation Teams for What’s Next

This isn’t just a compliance issue, it’s a critical company risk imperative. Everyone from AE’s, brokers, and loan officers, to processors, underwriters, and secondary marketing need to understand how NonQM verification impacts risk, pricing, and ultimately investor confidence.

How To Receive Free ($499 Value) Verification Letters

To kick off this “Post-CFPB” initiative, USTaxCerts is offering a free Verification Letter for any loan/expense ratio scenario discussed during your next production or operations “All Hands Call”. Let’s get together in your office or ours, on Teams or Zoom, and let’s build your NonQM verification compliance firewall that holds up to scrutiny and protects all those involved. No matter who or what ends up enforcing it. Reach out now either through our website USTaxCerts.com or LinkedIn to schedule your time.

Sources: Russell Vought says he will shut down CFPB USTaxCerts.com

Danny Flucke is co-founder of USTaxCerts, a Veteran owned and operated business based in Texas and supporting the NonQM industry nationwide. He has funded billions in AltA and NonQM production over his 20+ career with hands-on experience with IndyMac, Fremont, Carrington and Angel Oak, and most recently as the Head of Retail NonQM Production at KindLending, before resigning to launch USTaxCerts. He can be reached through the company website under “Requests”, or through his LinkedIn profile at Danny Flucke | LinkedIn