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Bill would ease regulations on small nonbanks


A House bill introduced last week would limit the Consumer Financial Protection Bureau's (CFPB's) oversight of small nonbank mortgage lenders.

The Republican sponsored H.R. 5907 would exempt certain nonbanks from examinations by the bureau unless state examiners or another federal agency refer cases to the CFPB. Most banks are exempted from bureau examinations.

The CFPB doesn’t regularly examine small nonbanks, but these institutions are constantly under the threat of a CFPB audit, the bill’s supporters say.

CFPB“An industry that has grown up to offer preparatory work for CFPB examinations, and these small lenders are spending a great deal of money on this preparatory work because they are all very, very concerned about having the CFPB come in and examine them,” said Glen Corso, executive director of the Community Mortgage Lenders of America (CMLA). “Frankly, we are trying to find a way to help relieve some of that rising regulatory cost burden.”

Nonbanks would have to meet several standards to be considered an exempted “small lender.” They would have to have a net worth of less than $50 million, originate less than 25,000 loans annually, and 95 percent of the loans would have to meet the standards of a qualified mortgage.

Corso said small nonbanks are now closely watched at the state level.  

“When I talk to members in my association, they tell me that if they do business in five or six states, that they are regularly examined,” Corso said. “Mortgage operations are regularly examined, and the state regulators are very much on top of the job.”

Smaller lenders also wouldn’t be required to audit vendors and contractors unless there was reasonable cause to believe they were violating laws.

The nonbank trade association, the Community Home Lenders Association, also supports the bill. Spokespersons for the American Bankers Association and the Independent Community Bankers of America said the groups had taken no position as of yet on the measure. The CFPB and other banking groups didn’t respond to requests for comment. 


 

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