Bill
HB 7867
Rhode Island would impose strict capital, liquidity, governance, audit, and risk-management requirements on covered nonbank mortgage servicers to strengthen oversight and safety.
Purpose and scope
- Title: AN ACT RELATING TO FINANCIAL INSTITUTIONS -- LICENSED ACTIVITIES
- Introduced by: Representative Joseph J. Solomon
- Referred to: House Committee on Corporations
- Effective date: Upon passage
- What it does: Establishes capital, liquidity, corporate governance, audit, and risk-management requirements for “covered mortgage servicers” (nonbank mortgage servicers) operating in Rhode Island. The act aims to strengthen oversight and safety standards for entities that service residential mortgage loans.
Key definitions (qualified for context)
- Covered mortgage servicer: A nonbank mortgage servicer with servicing portfolios of 2,000+ one- to four-unit residential loans serviced (or sub-serviced) for others, across 2+ states, and meeting certain annual reporting criteria in the NMLS Mortgage Call Report.
- Mortgage servicing rights (MSR) investor, sub-servicer, table-funding, and related terms defined to set regulatory scope.
- Other defined terms cover governance, audits, liquidity, risk management, internal/external controls, and reporting.
Main provisions (substantive changes proposed)
1) Financial requirements
- Capital and liquidity: Covered mortgage servicers must maintain capital and liquidity in compliance with GAAP. They must meet FHFA’s eligibility requirements for capital, net worth ratio, and liquidity if applicable, regardless of GSE (Fannie/Freddie) approval status.
- Documentation: Each servicer must adopt written policies and procedures for capital and servicing liquidity, including a sustainable methodology to satisfy subsection (c) standards; these must be available to the director or designee upon request.
- Additional liquidity: Servicers must hold sufficient allowable assets beyond servicing liquidity to cover normal business operations; require cash-management and operating plans aligned with size and sophistication.
2) Corporate governance
- Governance structure: Establish and maintain a board of directors (or an equivalent body) to oversee the servicer, with authority to mirror governance practices if the entity is not approved by Fannie/Freddie/Ginnie Mae or when a board alternative is allowed.
- Internal controls: Board must establish a corporate governance framework and internal controls; monitor compliance; ensure timely regulatory reporting (including NMLS Mortgage Call Reports).
- Internal audit: Require an internal audit function appropriate to the servicer’s size and risk, with independence to evaluate controls, risk management, and governance.
- External audit: Annual external audit by an independent public accountant, covering financial statements, internal control assessment, tangible net worth, MSR valuation/reserves (where applicable), fidelity/E&O insurance verification, and risk-management testing.
3) Risk management
- Risk management program: Implement a board-overseen risk-management program addressing key risk areas (credit, liquidity, operations, market, legal, and reputation risks). Programs must measure, monitor, and mitigate risk; scalable to the organization’s complexity.
- Annual risk assessment: Conduct a formal annual risk assessment culminating in a board report; maintain year-round evidence of risk management activities.
4) Applicability and exemptions
- Applies to covered mortgage servicers; if within a holding company group, requirements apply at the servicer level.
- Notable exemptions: Not-for-profit servicers or housing finance agencies; servicers solely owning or conducting reverse mortgage servicing.
5) Administration and oversight
- Regulatory authority: Director of the Rhode Island Department of Business Regulation (or designee) may adopt rules for implementation; may adjust requirements based on risk, provide partial exemptions for very low risk, or temporarily suspend requirements under extreme circumstances.
Section 5 (Implementation)
- The act takes effect upon passage.
Potential impact and who is affected
- Impacted entities: Nonbank mortgage servicers that meet the “covered” criteria (2,000+ residential mortgage loans serviced or sub-serviced, across multiple states).
- Compliance burden: Increased regulatory requirements for capital adequacy, liquidity planning, governance, external/internal audits, risk management, and annual reporting. Potential costs for compliance infrastructure, audits, and continuous governance processes.
- Supervisory oversight: Expanded regulatory scrutiny by the Rhode Island Department of Business Regulation with annual reporting requirements and access to financial and governance documentation.
Context and status
- Action history: Introduced Feb 27, 2026; referred to House Corporations; committee “held for further study” as of Apr 28, 2026.
- Sponsor: Rep. Joseph J. Solomon (co-sponsor listed).
Summary in one sentence
HB 7867 would impose stringent capital, liquidity, governance, audit, and risk-management standards on Rhode Island–based covered mortgage servicers, aiming to strengthen safety and soundness in the mortgage servicing market while providing the state regulator with enhanced oversight tools.
Compiled from official sources — confirm details with the bill’s official record.
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