The CFPB recently announced that it is conducting a review of the Regulation Z mortgage loan originator rules under the Regulatory Flexibility Act (RFA) and is seeking comments on the economic impact of the rules on small entities. The CFPB advises that “[t]hese comments may assist the Bureau in determining whether the Loan Originator Rules should be continued without change or amended or rescinded to minimize any significant economic impact of the rules upon a substantial number of such small entities, consistent with the stated objectives of applicable Federal statutes.” For those thinking that the rules might be rescinded, don’t get your hopes up.
The CFPB explains that pursuant to RFA section 610, in a review of a rule “agencies must consider several factors:
(1) The continued need for the rule;
(2) The nature of public complaints or comments on the rule;
(3) The complexity of the rule;
(4) The extent to which the rule overlaps, duplicates, or conflicts with Federal, State, or other rules; and
(5) The time since the rule was evaluated or the degree to which technology, market conditions, or other factors have changed the relevant market.”
The CFPB notes that it has received feedback on the mortgage loan originator rules from stakeholders, with topics addressed including (1) whether to permit different loan originator compensation for originating State housing finance authority loans as compared to other loans, (2) whether to permit creditors to decrease a loan originator’s compensation due to the loan originator’s error or to match competition, and (3) how the rule provisions apply to loans originated by mortgage brokers and creditors differently. The CFPB also notes that is has received feedback that the mortgage loan originator rules “provide important consumer protections that have provided benefits to consumers and the market.”
The CFPB requests the public to comment on the impact of the mortgage loan originator rules on small entities by reviewing the following factors:
- The continued need for the mortgage loan originator rules based on the stated objectives of applicable statutes and the rules.
- The complexity of the mortgage loan originator rules.
- The extent to which the mortgage loan originator rules overlap, duplicate or conflict with other federal rules, and, to the extent feasible, with state and local governmental rules.
- The degree to which technology, market conditions, or other factors have changed the relevant market since the mortgage loan originator rules were evaluated, including:
- How the impacts of the rules as a whole, and of major components or provisions of the rules, may differ by origination channel, product type, or other market segment.
- The current scale of the economic impacts of the rules as a whole, and of major components or provisions of the rules, on small entities.
- Other current information relevant to the factors that the CFPB considers in completing a section 610 review under the RFA.
The CFPB advises that commenters should consult the following rules in connection with responding to the specific CFPB comment requests:
- The definition and scope provisions for the mortgage loan originator rules in Regulation Z sections 1026.36(a) and (b).
- The mortgage loan originator compensation and steering restrictions in Regulation Z sections 1026.36(d) and (e).
- The mortgage loan originator compensation record keeping requirements in Regulation Z section 1026.25(c)(2).
- The mortgage loan originator licensing, registration and qualification requirements in Regulation Z section 1026.36(f)
- The screening and training requirements for loan originators who are not licensed in Regulation Z section 1026.36(f).
- The depository institution compliance procedures requirements related to the foregoing in Regulation Z section 1026.36(j).
- The requirement in Regulation Z section 1026.36(g) to include the name and Nationwide Multistate Licensing System & Registry (NMLS) identification number of the loan originator organization and primarily responsible loan originator in certain mortgage loan documents.
- The prohibitions in Regulation Z section 1026.36(h) against mortgage loan documents containing a mandatory arbitration provision or a provision barring a consumer from bringing a claim in court for damages or other relief in connection with any alleged violation of any federal law.
- The prohibition against the financing of single premium credit insurance with mortgage loans in Regulation Z section 1026.36(i).
While the last two items do not relate to mortgage loan originators, the provisions were adopted in a rulemaking that contained the mortgage loan originator provisions.