On January 11, 2012, the Consumer Financial Protection Bureau (CFPB) released new procedures for regulating nonbank mortgage lenders. The Mortgage Origination Examination Procedures apply to independent lenders, brokers, servicers, and others unaffiliated with banks and depository institutions, the bureau said in a statement.
The rules are a requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and were published one week after the January 4, 2012 recess appointment of Richard Cordray as the bureau's first director. The appointment of a director was a precondition to the CFPB enforcing regulations on certain sectors, including the nonbanking financial industry such as mortgage lending.
In a statement issued with the release of the new procedures, the CFPB said that the bureau's supervision of the nonbank financial sector will be rolled out in phases. Effective immediately, the CFPB will begin regulating nonbank entities involved in mortgage lending, including originators, brokers, servicers, and loan modification services; payday lenders; and private education lenders.
For other nonbank financial sectors, including debt collections, consumer credit reporting, and auto financing, the CFPB may supervise "larger participants" after that term is defined.
The bureau's publication of the rules of the game for nonbank mortgage lenders is a watershed moment for the agency. The agency now has authority to oversee entities that were a main target of the Dodd-Frank financial reform legislation, and it intends to immediatly begin its supervision program.
The bureau took little time to issue these regulations after the director's appointment, and significant enforcement has already begun with the announcement that the CFPB is investigating New Jersey-based PHH, Corp. in connection with how the company handled mortgage insurance premiums. (Read more here.)
Read more about the CFPB's new regulations for nonbank mortgage lenders: Wall Street Journal Online ; Law360.
