The Multi-State Mortgage Committee (MMC), a ten-state representative body created by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR), has issued examiner guidelines as a tool for consistent implementation of the Federal Reserve Board’s final rules for closed-end credit under Regulation Z. The rule introduced loan originator compensation restrictions to protect consumers against the unfairness, deception, and abuse that can arise with certain loan origination compensation practices. The rule generally prohibits payments to loan originators based on loan terms and conditions, dual compensation to originators by consumers and any other person, and “steering” consumers to loans to receive greater compensation.
“The guidelines are intended to assist state regulators of non-depository mortgage loan originators and creditors in their review of licensee policies and practices for compliance with the Federal Reserve Board’s final rule,” said Darin Domingue, Deputy Chief Examiner of the Louisiana Office of Financial Institutions and President of AARMR. “The guidelines developed by the MMC provide examiners in the field with a standardized set of procedures for evaluating basic compliance with the rule. Utilization of these guidelines will facilitate more consistency among state regulators when implementing their own policies and procedures to ensure compliance with the rule."
In developing the guidelines, which apply to residential mortgage loans, the MMC conducted extensive industry outreach to solicit feedback. “By reaching out to industry for their comments and by making the guidelines public, state regulators are increasing the transparency of mortgage supervision,” said John Ryan, President and CEO of CSBS. “State mortgage regulators must ensure compliance with the final rule developed by the Federal Reserve, but we want to do so in a way that protects consumers while creating greater certainty and limiting regulatory burden for those providers we regulate.”
The MMC guidelines may be downloaded here.