Mortgage Lenders + Servicers

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As we reported in December 2025, New Jersey’s Division on Civil Rights (DCR) adopted what its Attorney General described as the “most comprehensive state-level disparate impact regulations in the country” under the New Jersey Law Against Discrimination (LAD). Those rules, effective December 15, 2025, codify a broad burden-shifting framework for disparate impact claims across housing, lending, employment, public accommodations, and contracting, and include specific guidance on liability arising from the use of artificial intelligence and automated decision-making tools. Now, the Mortgage Bankers Association (MBA) has filed suit to stop them.

After years of pandemic-era forbearance programs, emergency moratoriums, and historically low foreclosure volumes, the mortgage market is undergoing a meaningful correction. Foreclosure activity is rising steadily across the country, and with it comes a familiar set of legal risks for servicers, lenders, and investors. The question is no longer whether foreclosure volumes will normalize — it is whether organizations are prepared for the compliance and litigation exposure that follows.

On May 15, the Office of the Comptroller of the Currency (OCC) finalized two closely linked rules on mortgage escrow accounts that respond directly to the issues we discussed in our recent post, Second Circuit on Remand in Cantero: New York Escrow-Interest Law Is Preempted, Over a Vigorous Dissent. In that decision, the Second Circuit held that New York’s 2% interest‑on‑escrow statute is preempted as applied to national banks under the Barnett Bank standard, deepening a circuit split with the First and Ninth Circuits. The OCC’s new rules both adopt the Second Circuit’s view of the underlying bank powers and attempt to bring regulatory clarity to the interest‑on‑escrow preemption question for OCC‑regulated institutions nationwide.

On May 5, Craig Trainor, Assistant Secretary for the Office of Fair Housing and Equal Opportunity (FHEO) at the U.S. Department of Housing and Urban Development (HUD), used the American Bankers Association’s Risk and Compliance Conference to send a clear message about how the Trump administration plans to enforce the Fair Housing Act (FHA) going forward, including with respect to how it will treat special purpose credit programs (SPCPs).

On May 5, the U.S. Court of Appeals for the Second Circuit issued its long‑awaited decision on remand in Cantero, again holding that New York’s 2% interest‑on‑escrow statute (General Obligations Law § 5‑601) is preempted as applied to national banks. This follows the U.S. Supreme Court’s unanimous 2024 opinion (discussed here), which vacated the Second Circuit’s earlier decision and instructed the court to apply the Barnett Bank “prevents or significantly interferes” standard through a “nuanced comparative analysis” of prior preemption precedents.

As reported by Law360, the U.S. Department of Justice (DOJ) has decided to move forward with its $68 million settlement with Colony Ridge Development LLC without seeking court approval or ongoing judicial oversight. The settlement at issue (discussed here) resolves DOJ and Texas reverse redlining and predatory lending claims in exchange for extensive operational reforms and $48 million in infrastructure improvements plus $20 million in law enforcement and public-safety spending, but no civil money penalties or direct monetary relief to borrowers.