The Consumer Financial Protection Bureau has clarified an important aspect of its servicing rule that provides a limited exemption for small banks.
The servicing rule goes into effect in January and it exempts small banks from many of the new servicing requirements if they service no more than 5,000 single-family loans.
It was originally believed the 5,000 loan exemptions applied solely to loans held in portfolio and serviced by the bank, thrift or credit union.
But the CFPB has told American Bankers Association officials and others the exemption also covers loans that a depository sells to investors, such as Fannie Mae and Freddie Mac, as long as the bank continues to service the loans for their customers.
“If you sell to the GSEs, you can still be a small servicer if you meet the 5,000 loan test,” ABA senior regulatory counsel Krista Shonk said Friday. She spoke at ABA’s real estate lending conference in New Orleans.
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As a result, some institutions were concerned they won’t qualify for the exemption if they serviced loans for other investors.
An ABA survey shows that small and medium banks sold nearly 60% of their loan production in 2012. Just 35% of the 261 respondents always retained the servicing.
Small banks can qualify for the exemption if they service no more than 5,000 loans on Jan. 1 of each year.
