Rep. Roger Williams, R-Texas, just introduced new legislation that could bring relief to small, community-based mortgage lenders, and the Community Mortgage Lenders of America, the only trade association solely dedicated to advocating for independent, community-based residential mortgage lenders, is applauding their efforts.

CMLA Chair Brooke Anderson Tompkins noted this legislation “would prioritize CFPB oversight where it will most directly benefit consumers: onto our nation's largest lenders and lenders that have clearly run afoul of sound lending rules.”

“Responsible community lenders offering plain-vanilla mortgage products did not cause the downturn or harm consumers,” Tompkins stated. “Rep. Williams’ bill strikes a balance of maintaining safe lending while freeing up resources so that more qualified Americans can get a mortgage to help build their families' futures.”

The legislation codifies the definition of a responsible community mortgage lender, and exempts them from Consumer Financial Protection Bureau examinations and enforcement except by a separate referral from a state or federal regulator.

“The Community Home Lenders Association strongly supports the Community Mortgage Lender Regulatory Act of 2016,” CHLA Executive Director Scott Olson said. “The bill would target CFPB supervisory and enforcement resources where they are most needed - on the larger lenders, while maintaining strong consumer protections.”

“Rep. Williams should be commended for his common sense bill to provide for comparable regulatory treatment for community non-bank mortgage lenders as is already provided for small and mid-sized banks,” Olson said. 

These responsible community lenders would also be exempt from requirements to audit a vendor or third-party contractor without reason to suspect illegal activity.

To qualify for the exemptions, lenders must meet these four metrics, which is how the legislation defines a responsible lender:

  • Nonbanks with a net worth of less than $50 million or banks with assets of $2 billion or less.
  • Originated either less than $5 billion or fewer than 25,000 mortgage loans in the prior year.
  • QM loans accounted for 95% or more of its loan volume over the preceding three years.
  • Did not violate the law or been subject to a cease and desist order relating to its mortgage activities in the preceding two years.

Edit: this article has been updated to reflect comments from CHLA.