- The CFPB should consider exempting smaller Independent Mortgage Banks (IMBs) from examinations in accordance with the Dodd-Frank Act’s directive to tailor supervision based on firm size, volume, and risk. Larger IMBs should only be subject to exams in cases where there are gaps in state examination schedules or at the request of state regulators.
- The CFPB should put an end to the practice of regulation through enforcement, which disproportionately impacts smaller IMBs and their borrowers. Fines and penalties imposed by the CFPB should be commensurate with the severity of the violation, clearly defined, and of a limited duration.
- The CFPB should enhance flexibility in the Loan Officer Compensation Rule to promote consumer choice, foster competition, and remove obstacles to State Housing Finance Agency (HFA) bond loans and IMB brokered loans.
- The CFPB should immediately halt the requirement for IMBs to register court orders and withdraw the proposed rule on form contracts, as both are deemed redundant and unnecessary for IMBs.
Referencing the Trump administration’s executive order on overregulation, the Community Home Lenders Association (CHLA) highlighted the detrimental impact of compliance costs on smaller IMBs. The CHLA emphasized that streamlined regulation for small banks should also apply to nonbank mortgage lenders to alleviate the burden of compliance expenses.
Furthermore, the CHLA underscored the duplicative nature of the CFPB’s supervisory authority and advocated for state regulators to have primary jurisdiction over small and midsize lenders, aligning with the administration’s stance on regulatory oversight.
Regarding the supervision of IMBs, the CHLA pointed out the myriad of existing regulations that nonbanks must adhere to, including the Fair Housing Act, ECOA, RESPA, QM rule, among others. The disparities between IMB loan officers and bank loan officers in terms of regulatory requirements were also highlighted.
Examinations emerged as a significant challenge for CHLA members, particularly for smaller IMBs that face substantial compliance costs in preparation for potential exams. The CHLA proposed a threshold for exemption based on firm size or loan volume to mitigate these costs and recommended that the CFPB refrain from conducting exams for smaller IMBs unless requested by a state regulator or in response to specific complaints.
Moreover, the CHLA criticized the CFPB’s approach of regulation through enforcement, emphasizing the need for a focus on compliance rather than penalties. The disproportionate impact on smaller IMBs due to compliance costs and fines was a key concern raised by the CHLA.
Lastly, the CHLA criticized the court order registry requirement and the proposed form contracts rule, deeming them redundant and costly for IMBs without serving any substantial consumer benefit.