Last Week, This Morning

February 23, 2026

Below you will find several key developments in the financial services industry, including related developments in information privacy and data security, from the past week. We add an "Amicus Brief(ly)¹" comment to each item, where we briefly (see what we did there?) note for friends (and again?) of CounselorLibrary the important takeaways from the developments outlined in the email. Our legal reporters - CARLAW, HouseLaw, InstallmentLaw, PrivacyLaw, and BizFinLaw - provide more comprehensive, real-time updates of federal and state laws, regulations, litigation, and other industry items of interest. For a personal guided tour and free trial of any of these legal reporters, please contact Michael Willer at 614-855-0505 or mwiller@counselorlibrary.com.

The Government Accountability Office recently released a report and recommendations concerning the financial monitoring of nonbank mortgage companies by Ginnie Mae and the Federal Housing Finance Agency.

The GAO found that, over the past decade, housing finance has increasingly relied on nonbank mortgage companies for loan origination and servicing, and a large percentage of those mortgage loans are guaranteed by Ginnie Mae and by Fannie Mae and Freddie Mac, which are under FHFA conservatorship. The GAO states that nonbanks have certain risks and that the "failure of a large nonbank - or multiple smaller ones - could disrupt mortgage markets and increase federal fiscal exposure." Therefore, the GAO studied: (1) the role of nonbanks in the mortgage market since 2014, including their benefits and risks; and (2) the extent to which Ginnie Mae and the FHFA have policies and procedures designed to assess the financial condition of nonbank mortgage companies.

The GAO recommended that: (1) the FHFA develop procedures to assess the reliability of nonbank data it uses for monitoring; (2) the FHFA and Ginnie Mae improve their processes for assessing risks of nonbank use of short-term credit lines; and (3) Ginnie Mae consider additional nonbank stress scenarios.

Amicus Brief(ly): It is hard to argue with the GAO's recommendations about some of the risks associated with nonbank lenders and servicers of government-backed consumer mortgage loans. The comparatively limited resources of a nonbank is a disadvantage to its long-term stability, and the absence of a prudential federal regulator like the FDIC or the OCC (nonbank lenders and servicers are subject to federal laws but primarily regulated by the state licensing agencies) gave the GAO enough pause to recommend that the FHFA and Ginnie Mae exercise more care and oversight over nonbanks that service these mortgages. The focus on nonbanks that have played an increased role in the mortgage market over the years since the financial/foreclosure crisis seems appropriate, especially in light of the liquidity risk nonbanks present when compared to their bank counterparts. The report is an interesting read, and we will be interested to see if any formal regulations follow from the GAO's recommendations.

On February 17, the Council of Economic Advisers, an agency within the Executive Office of the President, released a report that estimates the impact of the Consumer Financial Protection Bureau's rulemakings, supervision, and enforcement on the cost of credit for consumers from 2011 through 2024. The CEA provided the following key takeaways from its study:

• Since 2011, the CFPB has cost consumers between $237 and $369 billion, including fiscal costs, increased borrowing expenses, and reduced loan originations.
• Of the total above, increased borrowing costs amounted to at least $222-$350 billion ($160-253 per borrower) from 2011 through 2024. Broken down by loan type, the CFPB's rulemaking has cost consumers $116-$183 billion in higher mortgage costs ($1,100-$1,700 per originated loan), $32-$51 billion for auto loans ($91-$143 per loan), and $74-$116 billion for credit cards ($80-$126 per loan). These costs significantly surpass the CFPB's reported $21 billion returned to consumers (about $15 per borrower).
• In 2024 alone, the combined annual cost of credit for mortgages, auto loans, and credit cards is estimated to be between $24 and $38 billion.
• The higher borrowing costs from CFPB policies significantly reduced loan originations, resulting in an estimated economic efficiency loss of between $1.5 and $5.7 billion to consumers.
• The annual paperwork burden from CFPB rules exceeded 29 million hours or the equivalent of 14,100 full-time employees spending all of their time on documentation and reporting requirements at a cost of just under $2.5 billion. From 2011 to 2024, the CFPB's paperwork burden cost businesses an estimated $21 billion.

Amicus Brief(ly): The Trump administration has been very open in its pursuit of the demise of the CFPB. One of the consistent criticisms of the CFPB from industry over the years has been its tendency to pursue headlines with click-bait material that overstated its case (about things like practices that led to enforcement actions, market data and conditions, or creditor and servicer behaviors in general). Ironically, this study from the CEA features some of the hallmarks of the CFPB's historically overstated and potentially misleading statements and conclusions. The CEA makes somewhat selective use of statistics to blame the CFPB for increased consumer borrowing costs and not the cost of funds in an inflationary economy or other objectively plausible reasons for increased borrowing costs. There is no disputing the assertion that having the CFPB as the financial services sheriff for the past decade-plus has cost creditors and other providers money, but we are skeptical that the impacts are quite as dramatic as this report would have us believe.

In late 2025, the New York State Assembly enacted Chapter 623 of the 2025 Session Laws. Among other things, Chapter 623 revised two statutes that govern mortgage discharges - Section 275 of the New York Real Property Law (RPL § 275) and Section 1921 of the New York Real Property Actions and Proceedings Law (RPAPL § 1921). Chapter 623 added a new provision to both laws clarifying that if a mortgage borrower remitted payment at the location and in the manner specified by the mortgagee, the mortgagee must accept such payment and not return or destroy any payment received in reliance on a payoff statement. The amended laws required mortgagees to promptly apply such payments to the amounts owing under the mortgage. These revisions became effective immediately.

Chapter 623 raised a number of questions for mortgagees and servicers, including: What is required if the payment amount received is less than the payoff amount?

On February 13, the New York State Assembly revised these rules by its passage of Chapter 49 of the 2026 Session Laws. Chapter 49 makes two changes to Chapter 623 and the laws it revised. First, it pauses the effective date of the Chapter 623 revisions by 180 days, until early June 2026. Second, it significantly amends the payment acceptance rules initially imposed by Chapter 623.

Chapter 49 again revises RPL § 275 and RPAPL § 1921. As revised, mortgagees remain prohibited from returning, destroying, or otherwise refusing payments made pursuant to the terms of a payoff statement, even if the payment is insufficient to cover all amounts due. However, if the payment is defective in a way that prevents the mortgagee from determining (after reasonable diligence) the mortgage in question, the revised laws permit the mortgagee to return the payment. The revised laws also clarify that, while a mortgagee must apply payments made pursuant to a payoff statement, the preparation of a mortgage discharge is not necessary if the remitted payment does not cover the full amount of principal, interest, and other amounts owed under the mortgage.

Amicus Brief(ly): This is a tough one. In response to questions from servicers and mortgage holders, New York resolved the difficult question of what to do with a short payoff or other imperfect payoff in favor of borrowers. Specifically, the state wants servicers to record and apply short payoffs to accounts, not return them to the borrower. We understand that at least some mortgage servicers do not have an easy time applying a short payoff because of system limitations. This clarifying law goes into effect in a few months. Between now and then, servicers doing business in New York will have to review programming and processes to ensure that they apply short payoffs in a manner consistent with the underlying credit agreement and can follow up promptly with the borrower about the balance. The new law does make clear that the servicer does not have to record a satisfaction until the borrower pays all amounts owed - we would have figured that, but it is good to make it clear in the statute.

Following default on her vehicle credit agreement, a debtor's vehicle was repossessed by a repossession company working on behalf of the creditor. The debtor sued the creditor and the repossession company, claiming that the repossession company breached the peace when it repossessed her vehicle and, therefore, violated the Fair Debt Collection Practices Act. Specifically, the debtor alleged that her vehicle was repossessed despite her oral protests at the time of the repossession. The defendants moved for summary judgment, and a federal district court granted their motion. The debtor appealed.

The U.S. Court of Appeals for the Ninth Circuit affirmed. Section 1692f(6) of the FDCPA prohibits debt collectors from taking nonjudicial action to effect dispossession or disablement of property if there is no present right to possession of the property claimed as collateral through an enforceable security interest. Because the FDCPA does not clarify when a secured party has a right to possession of the property claimed as collateral, courts look to underlying state law. In this case, the Ninth Circuit looked to Arizona case law, which provides that a secured party may use self-help repossession if it proceeds without breaching the peace. However, Arizona courts have not considered whether repossession over a debtor's oral protest can, by itself, breach the peace.

The Ninth Circuit considered case law in other jurisdictions and found a split in authority. The court agreed with the cases holding that a debtor's oral objection alone, absent a risk of violence, does not constitute a breach of the peace. The Ninth Circuit found that the Arizona Supreme Court would apply a variety of factors to determine whether there was a breach of the peace (and not simply repossession over the debtor's oral objection), such as the use of law enforcement, violence or threats of violence, verbal confrontation, the debtor's consent (express or constructive), disturbance to third parties, where the repossession took place, and the creditor's use of deception. The Ninth Circuit concluded that the majority of these factors tipped in favor of the defendants. Although the debtor orally protested the repossession, the court pointed to the fact that there were no allegations of screaming or profanity that exacerbated a risk of violence, the debtor was given the opportunity to contact the creditor on the phone before the repossession was completed, and the repossession company agreed to tow the vehicle to the debtor's home first to allow her to remove personal belongings from the vehicle. Finding that the repossession company did not breach the peace as a matter of law, the Ninth Circuit concluded that the district court had properly granted summary judgment in favor of the defendants.

Amicus Brief(ly): This repossession case masquerading as an FDCPA case results in good law for creditors in the Ninth Circuit, where under the Uniform Commercial Code a simple oral protest of a repossession does not make the repossession a breach of the peace. But the case itself conjures a couple of important reminders. First, several states have case law or statutes on the books that offer guidance about what constitutes breach of the peace in repossession - providers should make sure they understand the parameters in the states where they operate. Second, these inquiries are incredibly fact specific. The fact-specific nature of a breach of the peace analysis is likely the reason why the circuits are split on the question of whether an oral objection is enough to trip a successful breach of the peace claim if the repossession company moves forward over the debtor's objection. Recent statistics tell us that consumer debts and defaults are both increasing so we may see a corresponding increase in wrongful repossession claims that attempt to build on this holding in the Ninth Circuit.

---

¹ For the unfamiliar, an “Amicus Brief” is a legal brief submitted by an amicus curiae (friend of the court) in a case where the person or organization (the “friend”) submitting the brief is not a party to the case, but is allowed by the court to file the brief to share information or expertise that bears on the issues in the case.