The Community Home Lenders of America (CHLA) wants small independent mortgage banks (IMBs) to be exempted from the proposed rules from the Consumer Financial Protection Bureau (CFPB) that order registry for nonbank financial services providers.
In December, the CFPB published a proposed rule that would require certain nonbank covered entities to report certain public agency enforcement actions and court orders for publication in a nonbank registration system (NBR) – a publicly available, online database.
The goal is to identify and prevent consumer harm from companies that repeatedly violate consumer financial protection laws under the NBR, the CFPB noted.
The proposal would require nonbank covered persons to appoint a senior executive to attest compliance with any such orders on an annual basis. It would also require that nonbank covered persons submit filings to the NBR within 90 days of the effective date of any applicable order.
CHLA, a national non-profit association of small- and mid-sized community-based mortgage lenders, pointed out the redundant requirement that IMBs already routinely provides to the Nationwide Multi-State Licensing System and Registry (NMLS) in a letter to the CFPB on Tuesday.
“CFPB already has the tools it needs to identify IMB agency and court orders, through the NMLS reporting mechanism and the registry NMLS maintains,” the letter from the CHLA reads.
Per NMLS MU1 forms, the CHLA noted that an IMB has to disclose all state or federal regulatory actions and certain court actions in the last 10 years. IMBs that don’t comply with the NMLS reporting requirements are subject to fines.
The letter noted that the CFPB claimed the proposed rule only applies to “larger non-banks” but the $ 1 million in gross receipts exemption is meaningless for IMBs.
IMBs over that level can hardly be considered to be “larger” nonbanks, and owners of smaller IMBs already have more personal accountability than any person at a large IMB, the letter states.
“We ask CFPB to create a compliance safe harbor for this new requirement if an IMB – or at the least, any smaller IMB – complies with NMLS reporting requirements,” the CHLA requested.
The CHLA claimed that failure to provide a smaller IMB safe harbor or exemption will exacerbate market and other factors that are already contributing to mortgage market industry concentrations.
More concentration, in turn, would mean less competition, higher prices and fewer choices for consumers, according to the CHLA.
The CFPB was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2011 with the purpose of promoting fairness and transparency for mortgages, credit cards and other consumer financial products and services.