State financial regulators and FHFA enter mortgage information sharing agreement

The Conference of State Bank Supervisors (CSBS) and the Federal Housing Finance Agency (FHFA) have signed onto a memorandum of understanding to formally share information between each other related to nonbank mortgage companies.

“The [MOU] establishes substantive information sharing protocols between state financial regulators and FHFA, improving the ability to coordinate on market developments, identify and mitigate risks, and ultimately, further protect consumers, taxpayers, and the nation’s housing finance system,” a joint announcement from CSBS and FHFA said.

The agreement, signed on Tuesday, is significant due to the regulatory roles of both bodies. CSBS is a conference of the primary regulators of nonbank mortgage companies at the state level, while FHFA is both regulator and conservator to the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, the most important counterparties for nonbank mortgage entities.

“While each supervisory agency maintains specific authorities related to the mortgage industry, only state financial regulators have complete prudential authority over nonbank mortgage companies,” the joint announcement said.

The MOU should lead to a more collaborative relationship between CSBS entities and FHFA according to Lise Kruse, North Dakota’s commissioner for financial institutions and CSBS board chair.

“Information sharing between state regulators and federal supervisors is common sense given our shared interest in a vibrant, stable mortgage marketplace,” Kruse said. “Establishing information sharing opens the door to a more collaborative oversight process that is beneficial to all involved.”

The MOU is seen as an important step for maintaining oversight over all the involved entities according to Sandra Thompson, the director of FHFA.

“The development of an information sharing framework is an important milestone that will better equip both FHFA and state regulators to oversee our respective regulated entities,” Thompson said. “Improved communication leads to better coordination, which in turn leads to better outcomes for consumers, market participants, and taxpayers.”

CSBS entered into a nondepository-focused MOU with the Consumer Financial Protection Bureau (CFPB) in 2011 which covers all 50 states, the District of Columbia and Puerto Rico. It also entered into a similar MOU with the U.S. Department of Housing and Urban Development (HUD) in 2013.

FHFA also routinely collaborates on information sharing with the CFPB through multiple MOUs, and entered into a formal MOU with HUD overseeing the GSEs in 2021 signed between Thompson and Former HUD Secretary Marcia Fudge with a focus on fair housing enforcement.