The Community Home Lenders Association (CHLA) told the Consumer Financial Protection Bureau that it should exempt smaller independent mortgage bankers (IMBs) from exams or audits to remain consistent with statutory requirements under the Dodd-Frank Act.
The recommendation is only one among other proposals which the lender group offered the CFPB in response to the bureau’s separate requests for information on enforcement and supervision. CHLA said it wrote on behalf of community-based mortgage lender/servicers and IMBs.
For the CFPB’s supervision program, CHLA recommended that the bureau adopt audit exemption for smaller IMBs as a formal policy or rule. The group noted that the CFPB is required to consider asset size and loan volume, loan product risk, and state regulatory oversight when supervising non-banks.
“We believe it would be reasonable to establish significantly higher threshold levels for a CFPB exam exemption for IMBs,” CHLA said. “Lenders originating more than 25,000 loans annually are generally examined by multiple state regulators each year. Therefore, CFPB exams are also redundant for such mid-sized lenders and a CFPB exam or audit should not be necessary except under special circumstances.”
CHLA said the CFPB should have a formal policy that it will not take enforcement action against smaller IMBs unless the primary or federal regulator refers the investigation to the CFPB.
Additionally, the group recommended that the CFPB refrain from using a so-called “Enforcement First” policy, provide more explicit guidance on mortgage rules and regulations, and provide formal safe harbors for good faith compliance when putting in place new rules.
“Many observers have argued that the CFPB has carried out a policy of taking excessive enforcement actions to correct violations without first giving a firm the opportunity to correct compliance issues or problems the CFPB identifies,” CHLA said. “Regardless of the degree to which this is empirically true, the perception that such a policy exists can have a chilling effect on smaller IMBs.”