Federal Reserve Makes Mortgage Units Subject to Reviews

The mortgage and finance company subsidiaries of bank holding companies will now be subject to consumer compliance reviews by the Federal Reserve Board. "The policy, which takes effect immediately, also provides for investigation of consumer complaints against nonbank entities," the Fed said. The Fed is the primary supervisor of bank holding companies but it has traditionally taken a hands-off approach to nonbank subsidiaries. There have been exceptions, however. Fleet Finance, the Atlanta subsidiary of a BHC, was charged and settled state allegations of predatory lending in 1992. Under chairman Ben Bernanke, the Fed initiated coordinated exams of nonbank subs with the Federal Trade Commission and state regulators in 2007. The new policy "builds on the pilot program and responds to a need for more effective supervision and consumer protection," the Fed said.