New MBA White Paper Outlines Regulatory Compliance for Commercial Mortgage Loans
The Mortgage Bankers Association released a white paper, Understanding the Regulatory Compliance Framework for Commercial and Business-Purpose Mortgage Loans.
“While commercial real estate lending is distinct from residential or other consumer-facing lending, questions regarding the applicability of consumer protection laws to commercial and other business-purpose mortgage loans often arise,” said MBA President and CEO David Stevens, CMB. “With the increasing focus on compliance in today’s regulatory environment, lenders making commercial or business-purpose loans should be mindful of potential federal and state regulatory requirements.”
MBA Senior Vice President of Commercial and Multifamily Thomas Kim said while the paper, prepared by attorneys at Hunton & Williams LLP.does not provide legal advice, “it examines the more significant federal laws and regulations that are commonly perceived to apply only in the consumer mortgage context, but may nonetheless apply to commercial and business-purpose mortgage loans in certain circumstances.”
Although the regulatory compliance framework is well defined for mortgage lenders making loans to consumers, the applicability of consumer protection laws to commercial and business-purpose mortgage loans tends to be less clear, the white paper said. It noted one common view is commercial and business-purpose loans are exempt entirely from the panoply of federal and state laws and regulations governing consumer mortgage lending. “However, while this is generally the case, certain consumer protection laws apply to secured transactions involving real estate, irrespective of the fact that the loan is secured by commercial real estate or the loan is for a business purpose,” said authors Abigail Lyle, Allison Botos Schilz and Rachael Craven.
Understanding the Regulatory Compliance Framework for Commercial and Business-Purpose Mortgage Loans addresses significant federal laws and regulations that are commonly perceived to apply only in the consumer mortgage context, but may nonetheless apply to commercial and business-purpose mortgage loans. It also provides a brief overview of certain state law issues, including state licensing requirements. But lenders must be mindful that the Equal Credit Opportunity Act will always apply and, thus, lenders must ensure their practices do not discriminate against, or disparately impact, borrowers in a protected class, it said. “In addition, irrespective of the commercial nature or business purpose, the Flood Disaster Protection Act could apply depending on the type of lender and location of the secured property.”
The white paper–designed as a tool for MBA members–can be accessed here with an MBA member login and password. (Your member login is your e-mail address. If your password is not available, you can reset your password by visiting www.mba.org and selecting the “Log In” link at the top of the page. Select “Forgot/Reset Password?” and you should receive instructions for resetting your password.)
