The proposal responds to President Donald Trump's order to examine the US financial regulatory system
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The US Treasury has issued a report outlining recommended changes to the regulation for mortgage lending and servicing.
In the report, the agency recommended changes to regulation that would promote the accommodation of an end-to-end digital mortgage, including acceptance of digital promissory notes, recognition of modern digital notary standards, and automated property appraisals.
The Treasury noted that the financial crisis marked a fundamental shift in the primary residential mortgage market, as a sizable share of the market was ceded by traditional deposit-based lender-servicers to nonbank financial firms, which now account for about half of new originations.
The report attributed the shift in part to regulations that sprang up following the crisis, including enforcement actions brought under the False Claims Act. Another factor is the early adoption by nonbank lenders of financial technology, which simplified loan application and approval.
“Policymakers should address regulatory challenges that discourage broad primary market participation and inhibit the adoption of technological developments with the potential to improve the customer experience, shorten origination timelines, facilitate efficient loss mitigation, and generally deliver a more reliable, lower-cost mortgage product,” the agency said in the report.
The report, which is fourth in a series, responds to an executive order by President Donald Trump that called on Treasury to identify laws and regulations that are inconsistent with certain principles for financial regulation it set forth.
“American innovation is a cornerstone of a healthy US economy. Creating a regulatory environment that supports responsible innovation is crucial for economic growth and success, particularly in the financial sector,” Treasury Secretary Steven Mnuchin said. “America is a leader in innovation. We must keep pace with industry changes and encourage financial ingenuity to foster the nation’s vibrant financial services and technology sectors.”
