Rhode Island law sets financial safeguards for large mortgage servicers

Covered servicers must maintain capital and liquidity and keep written plans for meeting those requirements. These requirements cover nonbank servicers with at least 2,000 one-to-four-unit home loans serviced or subserviced for others and operations in at least two states, districts, or U.S. territories. Servicers that meet the named federal agency standards for capital, net worth, and liquidity meet these requirements, whether or not they are approved to service loans for Fannie Mae or Freddie Mac. These capital and liquidity requirements do not apply to nonprofit servicers, housing finance agencies, or servicers solely owning or conducting reverse mortgage servicing, or to reverse mortgage portfolios administered by covered institutions. The law took effect upon passage.

Covered servicers must have board-level oversight, audits, and a risk management program. These requirements cover nonbank servicers with at least 2,000 one-to-four-unit home loans serviced or subserviced for others and operations in at least two states, districts, or U.S. territories. A servicer without approval from Fannie Mae, Freddie Mac, or Ginnie Mae may use a similar oversight body; an agency-approved board alternative may also be used. The board must set internal audit requirements suited to the servicer's size, complexity, and risks. The outside audit, internal audit results, and risk program must be available to the state director upon request. The law took effect upon passage. The outside audit and risk assessment are required each year.

The state director may require extra safeguards, make some rules inapplicable by notice, or temporarily suspend some rules by public notice. This authority concerns covered mortgage servicers and the capital, liquidity, and governance rules in the law. The director may order extra conditions after a formal review finds extremely high risk, or give notice that some or all capital, liquidity, or governance rules do not apply after a formal review finds extremely low risk. A temporary suspension may be announced when economic, environmental, or societal events are severe enough to warrant it. The law took effect upon passage. A temporary suspension applies when the director gives public notice.