A provision buried in H7867 creates immediate compliance obligations for nonbank mortgage servicers—and most don't realize it applies to them yet.
Most Rhode Island retail mortgage servicers have never heard of H7867. But if your business services 2,000 or more mortgage loans across two or more states, this bill—effective upon passage—creates four new, mandatory compliance requirements that will affect your budget and operations immediately.
Under Section 19-14.11-6 (Pages 10-11), any nonbank mortgage servicer meeting the threshold above must now:
Establish a formal board of directors. You can't operate without one. This means creating governance structure, defining roles, holding meetings, and maintaining records—even if you're a small operation.
Implement a written corporate governance framework. This isn't a checklist. It's a documented system covering how decisions are made, who has authority, how conflicts are managed, and how the board oversees management. You'll need to write it, maintain it, and update it as your business changes.
Undergo annual external audits by an independent CPA. Every year, a third-party auditor must review your financial records and controls. This is a direct, recurring cost—audit fees typically range from several thousand dollars upward, depending on complexity.
Maintain a written risk management program. You must document how you identify, measure, monitor, and manage risks—credit risk, operational risk, compliance risk, and others. This requires written policies, regular review, and board oversight.
The threshold is specific: 2,000 or more loans in operation across 2 or more states. If you're a single-state servicer or manage fewer than 2,000 loans, this provision doesn't apply to you—at least not yet. But if you're growing or operate regionally, you may cross this line sooner than you think.
The law applies to nonbank mortgage servicers. If you're a bank holding a mortgage servicing license, federal banking regulations may already require similar controls. Nonbanks—independent servicers, credit unions, and other non-depository lenders—face these requirements for the first time in Rhode Island.
Compliance isn't optional. The requirements take effect immediately upon the bill's passage. If you qualify, you cannot legally operate without meeting all four requirements.
Budget for audit costs first. Annual external audits are the most visible expense. Beyond that, you'll need to allocate staff time (or hire) to document governance, maintain risk policies, and support board operations. Smaller servicers often underestimate the administrative burden.
The good news: these requirements aren't arbitrary. They're designed to protect borrowers and reduce systemic risk. If you're already operating with professional governance and risk management, implementation may be straightforward—mostly formalizing what you already do.
If you're not, now is the time to begin. Waiting until an audit or regulatory exam exposes gaps is far more costly than building compliance proactively.
Source: Rhode Island H7867, Section 19-14.11-6, Pages 10-11. Effective upon passage.