Currently it might seem that mortgage regulations had been a bit stricter for non-bank mortgage lenders. Presently about 99% of banks or those with assets of less than $10billion are exempt from the Consumer Financial Protection Bureau (CFPB) regulation. This situation is the reverse when it comes to non-bank mortgage lenders which are subject to stricter regulations and licensing requirements.
Defining Independent Mortgage Bankers
Independent Mortgage Bankers (IMBs) are not banks in any way. IMBs are also not FDIC-insured depository institutions. The main difference between them and bankers is that they source out their capital from a combination of warehouse loans and personal investments.
IMBs are typically small businesses providing mortgage lending and servicing. Unlike mortgage brokers they fund their own mortgage loan origination, typically selling off their loans into the secondary market.
The importance of IMBs in the mortgage industry is huge since it now equates to 85% of the Federal Housing Administration mortgages. Their share ins Ginnie Mae loans also exploded to 73% last year from a meager 12% in 2010. In general, they are now playing a key role in easing access to mortgage credit.
Key Hurdles of IMBs in Mortgage Regulations
Here are some of the hurdles which IMBs encouter in their operations:
- Does not enjoy same exemption from CFPB as mortgage banks if they have less than $10 billion assets.
- Financial difficulties as they absorb costs of dual mortgage regulations.
- Huge disparity in qualification requirements for mortgage loan originators.
The key problems above makes it more difficult for IMBs specially smaller ones to compete since despite being small and less financially capable they are the ones that are facing the stiffer regulations.
Mortgage Regulations Reform Under the Trump Administration
President Donald Trump is focusing on streamlining regulations of key financial service providers and of these providers are lenders and mortgage bankers. If the government wants to strengthen the economy then making the regulation requirement easier and balanced will be a good way.
“Supervision of nonbanks should be returned to state regulators, who have proven experience in this field and an existing process for interstate regulatory cooperation,” this is according to the June Treasury Department Report.
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References: National Mortgage News