MBA: Are Lenders “Too Small To Comply” With New Regulations?

NewImageDetailed testimony presented this week by the Mortgage Bankers Association before the House Financial Services Committee Subcommittee on Insurance, Housing and Community outlines concerns regarding changes to the mortgage origination process and the impact of those changes on homeowners and businesses. Those changes, including the Qualified Residential Mortgage Proposal, risk retention requirement, SAFE Act and loan originator compensation rule, place a strong burden on lenders, MBA states.

The testimony, given by Hank Cunningham, chairman of the Residential Board of Governors of the Mortgage Bankers Association, focused on changes mandated under Dodd-Frank and the impact they have on lenders and borrowers.

“Most lenders know we will never be ‘too big to fail,’ but we also wonder if we are ‘too small to comply,’ raising the very real possibility that borrowers may lose our services and the important competition we bring to the market,” he said.


While reverse mortgage loans are not included in the QRM definition, other changes under Dodd-Frank such as the Secure and Fair Enforcement Mortgage Licensing (SAFE) Act requirements and loan originator compensation rules have had a strong impact on the industry.

With regard to the SAFE Act, Cunningham said the MBA has been concerned about a state-by-state approach to licensing resulting in inconsistent requirements and that more can be done to achieve the goals of the legislation.

For loan originator compensation changes, Cunningham urged that Congress should carefully monitor the CFPB‘s implementation of the new rule and insist on a review of its guidance.

“The sheer quantity of rules is placing great stress on lenders, particularly smaller lenders who serve communities throughout the nation every day. Lenders are scaling back the number of production employees as business declines, but are offsetting those cuts with new compliance hires,” Cunningham said. “This kind of trade off is both undesirable and unsustainable.”

View the full testimony.

Written by Elizabeth Ecker

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  • The NMLS Call Report requirement is quite a burden for small businesses.  Its design is fashioned after the quarterly Call Reports that banks are required to file to show their compliance with regulatory capital requirements. 

    I previously worked as a CPA for KPMG’s Banking Group, and we used to prepare these reports for our smaller bank clients, and review those prepared by our larger bank clients.  Our clients included some of the largest banks in the world, as well as small community banks. 

    I have no idea why NMLS needs such a detailed financial report from brokers. Some of the information requested provides no meaningful use in that context, and most brokers will be required to update their accounting system and hire a CPA every quarter to prepare it (the cash flow schedule for example).  It places an unnecessary regulatory burden and expense on small business owners.

  • I agree with Mr. Jackson’s comment totally. As a small broker, I am in process of trying to justify brokering in this environment vs surrendering and going to work for a larger entity so that they can have the regulatory headache.  I am in business to make money, not to satisfy some politicians whose agenda seems to be “only do business with those large banks (there are the honest and chosen” and avoid those brokers who by the pols definition are dishonest and cannot be trusted.  
    What is needed is sanity at the regulatory level. So far, I have seen little of that and the only thing that has happened so far is that our customer is getting screwed by having to pay higher costs and fees to satisfy some political agenda.

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