Mortgage News March 3, 2023
According to the Community Home Lenders of America (CHLA), small independent mortgage banks (IMBs) should be exempt from new Consumer Financial Protection Bureau (CFPB) rules requiring a registry of nonbank financial services providers.
A proposed rule by the Consumer Financial Protection Bureau (CFPB) requires nonbank-covered entities to register with the nonbank registration system (NBR) – an online database that is publicly available to the public.
CFPB highlights the goal of finding and preventing consumer harm from companies violating the NBR repeatedly. In the proposal, a senior executive would be required to certify compliance with such orders on an annual basis for nonbank-covered persons.
A nonbank-covered person would also be required to submit filings to the NBR within 90 days after an order becomes effective.
In a letter to the Consumer Financial Protection Bureau on Tuesday, CHLA pointed out the redundant requirement that IMBs already routinely provide to the Nationwide Multistate Licensing System and Registry (NMLS).
NMLS MUI1 forms require IMBs to disclose all state and federal regulatory actions in the last ten years, as well as certain court actions. NMLS fines IMBs that fail to comply with its reporting requirements.
In the letter, the CFPB asserted that the proposed rule only pertains to “larger non-banks,” while for small businesses, the exemption of $ 1 million is meaningless.
The letter indicates that IMBs over that level can hardly be considered “larger” nonbanks, and smaller IMB owners are already held accountable in a more personal manner than those at larger ones.
CHLA argues that failing to offer a smaller exemption or safe harbor to IMB will exacerbate concentrations in the mortgage market.
As a result of more concentration, consumers will have fewer choices, higher prices, and less competition, says the CHLA.
Mortgages, credit cards, and other consumer financial products and services are subject to the CFPB’s oversight under Dodd-Frank Wall Street Reform and Consumer Protection Act of 2011.
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