For the past year nonbank loan officers have complained they must meet state licensing requirements and pass LO tests while their bank counterparts merely need to register with the states. A new proposal from the Consumer Financial Protection Bureau moves toward parity between the two LO types but apparently falls short.
Released late Wednesday night, the proposal—whose main objective is altering current compensation structures—asks that banks conduct “character and fitness” tests and criminal background checks on their LOs. The agency says this requirement would improve “parity” between the two groups.
However, the proposal doesn’t change the fact that nonbank LOs (including loan brokers) must be licensed with the states while bank LOs just have to register.
Marc Savitt, president of the National Association of Independent Housing Professionals, said the agency’s intentions might be good, but he feels the new LO language merely allows banks “to self-certify” instead of relying on the states. (NAIHP represents brokers and appraisers, among others.)
Savitt, who manages a small brokerage operation in West Virginia, said he’s perplexed as to why the agency is picking on small businesses. “We have just 10% of the market and they’re jumping on us,” he said. He’s hopeful that in time the CFPB might see the light when public debate begins on the new proposals.
In the past bank LOs have noted that they face regulatory scrutiny from federal banking agencies—especially in regard to CRA laws—that many nonbanks escape.
