The Consumer Financial Protection Bureau (CFPB) announced on Friday that it’s rescinding a rule from the previous administration that requires nonbank financial services providers to register certain enforcement actions and court orders with a new federal database. The regulation was the target of criticism from the mortgage industry.
In practice, the CFPB said it will not prioritize enforcement or supervision actions against entities that fail to meet upcoming deadlines, as it pursues a new rulemaking process to either repeal or narrow the existing rule.
“The bureau will instead continue to focus its enforcement and supervision activities on pressing threats to consumers,” the CFPB said in a statement.
Timeline of change
The proposed rule, introduced in late 2022, requires nonbank entities to report public agency enforcement actions and court orders for inclusion in a nonbank registration system (NBR) – a publicly available online database. The final rule was published in July 2024, with an implementation date of Sept. 16, 2024.
Under the original timeline, smaller nonbanks supervised by the CFPB were required to register by April 14, 2025, with all covered nonbanks expected to comply by July 14, 2025.
The main criticism from mortgage trade groups centered on what they characterized as the rule’s redundancy. Independent mortgage banks (IMBs) already report similar information through the Nationwide Multistate Licensing System and Registry (NMLS).
The NMLS MU1 forms already require IMBs to disclose all state or federal regulatory actions — as well as certain court actions — from the past 10 years. IMBs that fail to comply with NMLS reporting rules are subject to fines.
Industry response
Mortgage trade groups applauded the freeze on the nonbank registry rule.
The Community Home Lenders of America (CHLA), a national non-profit association representing small- and mid-sized community mortgage lenders, said the recent decision provides “regulatory relief for smaller lenders from duplicative Registry requirements.”
“CHLA called for such action in our February letter to the CFPB, as part of an agenda of regulatory streamlining so mortgage lenders can concentrate on their main business — originating loans,” the trade group said in a statement.
Another trade group, the Mortgage Bankers Association (MBA), sent a letter to the CFPB in January requesting a delay in the compliance deadlines. At that point, MBA president and CEO Bob Broeksmit attacked the rule, saying it was “costly and duplicative.”
Regarding the current freezing, MBA’s senior vice president of residential policy and strategic industry engagement, Pete Mills, said in a statement that the CFPB “could have instead added its enforcement information on mortgage companies to the already comprehensive consumer-facing database maintained by the Conference of State Bank Supervisors’ NMLS Consumer Access portal.”
“MBA is monitoring the CFPB’s next steps and will advocate for them to consider issuing an NPR to rescind the regulation,” Mills said.
