Rhode Island sets financial and oversight rules for large mortgage servicers

Covered mortgage servicers must maintain capital and enough funds for servicing and normal business costs. Covered servicers are nonbank companies with at least 2,000 one-to-four-unit home loans serviced or subserviced for others, excluding whole loans owned and loans briefly serviced before sale, and operations in at least two states, districts, or U.S. territories. Servicers meeting the stated federal agency standards for capital, net worth, and liquidity meet these requirements, whether or not they have agency servicing approval. These financial requirements do not apply to nonprofit servicers, housing finance agencies, or the specified reverse mortgage servicing or portfolios. The act took effect upon passage.

Covered mortgage servicers must oversee compliance and risks, keep internal controls, and obtain annual outside audits. These requirements apply to covered nonbank mortgage servicers meeting the loan portfolio and multistate definition. A servicer without approval to service loans from Fannie Mae, Freddie Mac, or Ginnie Mae may use a similar oversight body; an approved board alternative may also be used. An independent public accountant must conduct the annual outside audit. Internal audit requirements must fit the servicer’s size, complexity, and risks. The servicer must make required frameworks, audit materials, and annual risk reports available to the state director or the director’s designee upon request. The act took effect upon passage.

The state director may set extra conditions, find some requirements inapplicable to a servicer, or temporarily suspend requirements by public notice. This authority concerns the financial and governance requirements for covered mortgage servicers. After a formal review finds a specific servicer’s risk extremely high, the director may order extra conditions to support safe operations and legal compliance. After a formal review finds a specific servicer’s risk extremely low, the director may give notice that some or all listed requirements do not apply. The director may publicly announce a temporary suspension when severe economic, environmental, or societal events warrant it. The act took effect upon passage.