52 Community Independent Mortgage Bankers (IMBs) Send Letter to CFPB Seeking Streamlined Regulation
Contact: Scott Olson For Immediate Release
571-527-2601 May 21, 2018
A broad nationwide cross section of community-based independent mortgage bankers (IMBs) jointly submitted a formal comment letter today responding to the CFPB’s request for information on CFPB supervision. The IMB letter is asking the CFPB to follow the Dodd-Frank statute requiring risk-based supervision of non-banks – specifically calling for a targeted exemption from the CFPB’s duplicative exam authority for smaller IMBs, and a policy or rule that it will not take enforcement action against such smaller IMBs without a referral from a state or federal regulator.
The Community Home Lenders Association (CHLA) sent a similar comment letter in early April. Many individual CHLA members signed on to today’s letter – as did many members of the Community Mortgage Lenders of America (CMLA) and many IMBs not affiliated with either group.
The letter cites a statutory requirement [Subsection 1024(b)(2)] in the Dodd-Frank legislation that created the CFPB that requires the CFPB to tailor its supervision of non-banks based on factors which include a firm’s asset size, volume of transactions, risks to consumers of its financial product, and the extent to which a firm is subject to oversight by states for consumer protection. [Text of this statutory requirement enclosed at end of release]
Based on this statutory requirement, the 52 IMBs jointly wrote the CFPB, referring to this statutory requirement, and specifically calling for the following
“In order to fully comply with this requirement, the CFPB should adopt a formal policy or rule that exempts smaller IMBs from being subject to CFPB exams or audits.
We also urge the CFPB to adopt a formal policy or rule under which it will not take enforcement action against smaller IMBs unless one of their state regulators or a federal regulator provides a referral for the CFPB to investigate and take action.”
The letter advanced several arguments in favor of its request:
* CFPB Acting Director Mulvaney has recently been quoted as saying the CFPB is exploring allowing prudential regulators to take the lead on more supervisory matters to reduce duplication and ease the burden of exams.”
* Last June’s Treasury report on regulation highlighted the burdens of dual regulation of both the CFPB and primary state regulators, and recommended 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.”
* A model for this approach can be found in H.R. 1964, the “Community Mortgage Lender Regulatory Act of 2017,” legislation introduced by Rep. Roger Williams (R-TX) that provides for streamlined, risk-based regulation of smaller IMBs through a similar approach.
IMBs that did not sign on to the formal comment letter should feel front to contact CHLA or CMLA, which will keep a list of additional firms that support the letter – and will forward that along to the CFPB.
Section 1024(b)(2) of Dodd-Frank:
(2) RISK-BASED SUPERVISION PROGRAM. The Bureau shall exercise its authority under paragraph (1) in a manner designed to ensure that such exercise, with respect to persons described in subsection (a)(1), is based on the assessment by the Bureau of the risks posed to consumers in the relevant product markets and geographic markets, and taking into consideration, as applicable—
(A) the asset size of the covered person;
(B) the volume of transactions involving consumer financial products or services in which the covered person engages;
(C) the risks to consumers created by the provision of such consumer financial products or services;
(D the extent to which such institutions are subject to oversight by State authorities for consumer protection; and
(E) any other factors that the Bureau determines to be relevant to a class of covered persons