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On June 23, Rhode Island Governor Dan McKee signed Senate Bill 3075, establishing capital, liquidity, corporate governance, audit, and risk-management requirements for certain nonbank mortgage servicers. The law took effect upon passage.
The law applies to a nonbank mortgage servicer that services or subservices for others at least 2,000 one-to-four-unit residential mortgage loans, excluding whole loans owned and loans being interim serviced before sale, and operates in at least two U.S. states, districts, or territories. Specifically, the law requires covered servicers to:
- Maintain capital and liquidity controls. Covered servicers must use generally accepted accounting principles and maintain written policies addressing capital, servicing liquidity, and operating liquidity. Servicers that meet applicable Federal Housing Finance Agency requirements satisfy the law’s capital, net worth, and liquidity standards.
- Establish board oversight. A board of directors, or an authorized equivalent body, must oversee corporate governance, internal controls, legal compliance, and regulatory reporting, including the NMLS Mortgage Call Report.
- Implement audit and risk-management programs. Covered servicers must establish internal-audit requirements, obtain annual external audits, and maintain programs addressing credit, liquidity, operational, market, legal, and reputation risks.
- Comply with risk-based directives. The state regulator may impose additional conditions on high-risk servicers, waive requirements for low-risk servicers, or temporarily suspend requirements during severe events.
The financial-condition requirements do not apply to not-for-profit servicers, housing finance agencies, or servicers solely owning or servicing reverse mortgages. The law also requires covered servicers to conduct an annual risk-management assessment and report the results to the board.
Putting It Into Practice: Rhode Island’s new requirements are part of a broader trend of states imposing additional obligations on mortgage lenders and servicers, including recent state laws governing divorce-related mortgage assumptions (previously discussed here). Because Senate Bill 3075 is already effective, covered servicers should promptly review their capital, liquidity, governance, audit, reporting, and risk-management policies for compliance. Multistate servicers should also monitor other states for similar requirements and update their compliance programs as necessary.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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