A new Rhode Island law requires certain mortgage servicers to undergo annual external audits and maintain strict capital standards—a compliance shift many owners haven't yet prepared for.
Most Rhode Island retail business owners don't realize that a provision buried in H7867 may directly affect their operations if they service residential mortgages. The law, which took effect upon passage, establishes new financial oversight requirements for nonbank mortgage servicers—and the compliance costs are real and recurring.
If your company services 2,000 or more residential mortgage loans across two or more states, H7867 applies to you. This threshold captures mid-sized and larger servicers operating across state lines, even if mortgage servicing isn't your primary business line.
Smaller servicers—those below the 2,000-loan threshold or operating in only one state—are not covered by these requirements.
Under Section 2, § 19-14.11-6(e) of the Rhode Island General Laws, covered mortgage servicers must now:
Additionally, the law requires covered servicers to maintain adequate capital and liquidity reserves, establish board-level risk management oversight, and implement formal governance structures around these financial controls.
Annual external audits by independent CPAs represent a significant, recurring compliance cost. Unlike internal reviews, external audits must meet professional standards and cannot be performed by your own accounting staff. The scope is also broad—auditors will examine not just your books, but your internal controls, insurance coverage, and risk management practices.
For servicers already managing complex regulatory requirements, this adds another layer. For those new to servicing or scaling operations, it's a cost that must be factored into business planning and pricing models.
The law also ties compliance to specific financial metrics: tangible net worth and MSR valuations must be audited and verified annually. If your company's financial position changes materially, or if you're valuing servicing rights differently than an independent auditor would, discrepancies could trigger compliance issues.
H7867 became effective upon passage. There is no grace period or phase-in window. If your company meets the coverage threshold, you should assume these requirements are in effect now.
If you service mortgages across multiple states, review your loan count and operating footprint against the 2,000-loan, 2-state threshold. If you're covered, contact your CPA or audit firm to discuss scope, timeline, and cost for an annual external audit that meets the law's requirements. Document your capital and liquidity position, and ensure your board or management has assigned responsibility for risk oversight.
The Rhode Island Retail Merchants Association and other trade groups have prepared business-specific guidance on H7867 compliance; a free resource guide is available through your local chamber or trade association.
Source: H7867, Section 2, § 19-14.11-6(e), effective upon passage.