CHLA Writes The CFPB With Recommendations For Streamlining Regulation Of IMBs

The Community Home Lenders of America (CHLA) sent a letter to the Consumer Financial Protection Bureau (CFPB) laying out suggested reforms to streamline CFPB regulation of smaller independent mortgage banks (IMBs).

Noting that recent Administration actions regarding the CFPB reflect the need for fundamental changes with the CFPB, the CHLA letter highlighted 4 key priorities to streamline regulation of smaller IMBs, in order to arrest factors that have contributed to mortgage industry consolidation and less consumer choices:

1.     The CFPB should exempt smaller IMBs from exams, pursuant to the Dodd-Frank statutory requirement to tier supervision by firm size, volume, and risk – and limit exams of larger IMBs to gaps in state exam schedules or to state requests for the CFPB to conduct an exam.

2.     The CFPB should end regulation by enforcement, a practice that disproportionately harms smaller IMBs and their borrowers.  Moreover, CFPB fines and orders should be based on the severity of the violation and should be clearly defined and be of finite term.

3.     The CFPB should increase LO Comp Rule flexibility –  to help consumers by increasing competition and removing impediments to State HFA bond loans and IMB brokered loans.

4.     The CFPB should immediately suspend court order registry requirements for IMBs and withdraw its proposed form contracts rule.  Both are redundant and unnecessary for IMBs.

The CHLA letter called attention to a 2017 Treasury Report  by the first Trump Administration that labeled CFPB supervision of non-banks as “duplicative and unnecessary”  and concluded that “Supervision of nonbanks should be returned to state regulators, who have proven experience in this field and an existing process for interstate regulatory cooperation.”

In calling for these changes, Administration, the CHLA letter also cited the Dodd-Frank statute that created the CFPB, noting that CFPB regulation of non-banks (like IMBs) is required to be tiered by firm size, volume, and risks of the financial activity.  The CHLA letter also cited the precedent of similar streamlining and regulatory treatment of smaller banks by banking regulators.