On June 23, Rhode Island Governor Dan McKee signed S 3075 into law, establishing capital, liquidity, and corporate-governance requirements for covered nonbank mortgage servicers, effective upon passage.
The law defines a “covered mortgage servicer” as a nonbank servicer with 2,000 or more one-to-four-unit residential mortgage loans serviced or subserviced for others, excluding whole loans owned and loans interim serviced prior to sale, that operates in two or more U.S. states, districts or territories. Under the financial-condition provisions, covered servicers must maintain capital and liquidity in accordance with GAAP, with a safe harbor for servicers meeting the FHFA’s eligibility requirements for enterprise single-family seller/servicers — covering capital, net worth ratio, and liquidity — regardless of whether the servicer is approved for government-sponsored enterprise servicing. Covered servicers must maintain written capital and servicing-liquidity policies and operating-liquidity plans scaled to institutional size and sophistication. The financial-condition requirements do not apply to not-for-profit servicers, housing finance agencies, or servicers solely conducting reverse mortgage servicing.
The law also requires covered servicers to establish a board of directors responsible for: (i) maintaining a written corporate-governance framework with appropriate internal controls; (ii) monitoring compliance with that framework and Rhode Island general laws; and (iii) ensuring accurate and timely regulatory reporting, including filing the NMLS Mortgage Call Report. Boards must set internal-audit requirements appropriate to the servicer’s size, complexity, and risk profile, and covered servicers must receive an annual external audit covering internal controls, tangible-net-worth computation, mortgage-servicing-rights valuation, and risk-management controls. Covered servicers must also maintain a risk management program addressing credit, liquidity, operational, market, legal and reputation risk, with an annual assessment reported to the board. The law grants the state director authority to impose additional conditions on servicers determined to pose “extremely high” risk, waive requirements for those where risk is deemed “extremely low,” or temporarily suspend provisions during severe economic, environmental or societal events.
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