- The CFPB ought to exempt smaller IMBs from exams, pursuant to the Dodd-Frank statutory
requirement to tier supervision by agency dimension, quantity, and danger — and restrict exams of bigger
IMBs to gaps in state examination schedules or to state requests for the CFPB to conduct an examination. - The CFPB ought to finish regulation by enforcement, a apply that disproportionately harms smaller IMBs and their debtors. Furthermore, CFPB fines and orders ought to be based mostly on the severity of the violation and ought to be clearly outlined and be of finite time period.
- The CFPB ought to improve LO Comp Rule flexibility — to assist customers by growing competitors and eradicating impediments to State HFA bond loans and IMB brokered loans.
- The CFPB ought to instantly droop court docket order registry necessities for IMBs and withdraw its proposed kind contracts rule. Each are redundant and pointless for IMBs.
The commerce group pointed to the Trump administration’s Jan. 31 govt order, which mentioned that overregulation “stops American entrepreneurship, crushes small enterprise, reduces buyer alternative, and discourages innovation.”
Compliance prices for smaller IMBs is “significantly onerous, as such lenders lack compliance price economies of scale in comparison with massive lenders,” the CHLA argued. “Federal banking regulators have lengthy adopted a coverage of streamlined regulation for small banks in recognition of this act. The CFPB ought to do the identical for nonbank mortgage lenders.”
The CHLA famous that the Trump administration has already concluded that the CFPB’s supervisory authority is duplicative and pointless. State supervisors, the administration mentioned, ought to have jurisdiction, and the CFPB shouldn’t have oversight of small and midsized lenders.
When it comes to streamlining supervision of IMBs, CHLA mentioned that nonbanks are already topic to a bunch of laws — together with the Truthful Housing Act, the Equal Credit score Alternative Act (ECOA), the Actual Property Settlement Procedures Act (RESPA), the Certified Mortgage (QM) rule and lots of extra.
Each mortgage officer who works for an IMB should meet SAFE Act testing, prelicensing and persevering with training necessities, and impartial background checks. However financial institution LOs are exempt from the SAFE Act and in addition keep away from broader CFPB supervision.
Exams are one other ache level for CHLA’s members. Whereas bigger IMBs are topic to extra exams than smaller IMBs, “the failure to supply a proper and clear exemption beneath this particular statute to smaller IMBs creates important CFPB compliance prices on small IMBs,” the letter reads. They need to spend tens or lots of of hundreds of {dollars} to arrange for exams that will by no means happen.
“Subsequently, the CFPB ought to publicly announce and observe a coverage that it’s going to not conduct exams for smaller IMBs, establishing a threshold with regard to dimension and/or mortgage quantity that exempts not less than a comparable proportion of IMBs as are excluded beneath the $10 billion financial institution exemption threshold.”
If this have been to happen, the CHLA argues that the CFPB may nonetheless conduct an examination of a smaller IMB if a state requests that the bureau accomplish that, or if the bureau receives a disproportionate variety of complaints a few specific lender. The CHLA added that the bureau ought to restrict exams of bigger IMBs based mostly on want.
“Many bigger IMBs are topic to exams by quite a few states, together with in some instances a multi-state examination course of,” the letter reads. “The CFPB ought to be cognizant of state examination efforts and eschew conducting exams for bigger IMBs besides the place there are gaps in state exams of the agency or the place particular states are asking the CFPB to conduct an examination (e.g., as a consequence of a scarcity of capability). This strategy is according to conclusions within the 2017 Treasury Report.”
One other frustration of the mortgage trade is the CFPB’s predilection for regulation by enforcement. The CHLA argues that the aim of mortgage guidelines ought to be compliance, not fines or penalties, and the CFPB ought to enable IMBs to repair issues earlier than imposing important fines.
“Regulation by enforcement disproportionately impacts smaller IMBs, as a result of smaller IMBs lack the mortgage quantity and income economies of scale that giant lenders need to pay outdoors attorneys and lobbyists to remain present on how the CFPB may interpret its guidelines,” the CHLA wrote.
“Regulation by enforcement additionally disproportionately impacts smaller IMBs, as a result of in contrast to when fines are levied towards massive firms (the place shareholders merely pay the effective and take in them as a value of doing enterprise) fines levied towards smaller IMBs find yourself being paid by people as house owners, the place even a comparatively smaller effective can have a major monetary influence on a person and their enterprise.”
Lastly, the CHLA took intention on the 486-page court docket order rule, which it calls redundant since IMBs are already required to supply the data to the Nationwide Multistate Licensing System (NMLS). Equally, the proposed kind contracts rule provides prices and serves no shopper function, the commerce group argued.
