Iowa enacts prudential standard and corporate governance requirements for mortgage servicers

On April 10, Iowa enacted HF 2392 (the “Act”) which will establish prudential safety and soundness requirements on mortgage servicers. The Act will establish prudential standards and corporate governance requirements on covered institutions, which include mortgage servicers that service at least 2,000 residential mortgage loans. (The Act will not apply to servicers that exclusively manage or service reverse annuity mortgage loans, including those managed by certain covered institutions.)

According to the Act, covered institutions must maintain adequate capital and liquidity requirements in line with GAAP. Covered institutions may meet these requirements by adhering to FHFA standards for enterprise single-family sellers or servicers. These institutions must have written policies and procedures for maintaining capital and liquidity and must provide these to the administrator when requested.

Regarding operating liquidity, covered institutions will be required to hold sufficient liquid assets to maintain normal business operations. They must also develop and implement plans and procedures to maintain this operating liquidity, which must be documented and available for review. Covered institutions must also have a sound cash management plan and business operating plan appropriate for their complexity to ensure ongoing operations.

On corporate governance, covered institutions will be required to have a board of directors responsible for oversight or a similar oversight committee if not approved for servicing by certain enterprises. The board or committee must establish a corporate governance framework, ensure compliance with the framework and the subchapter, perform regulatory reporting, establish internal audit requirements, and maintain a risk management program. The institution must also undergo an annual external audit and conduct an annual risk management assessment. The Act will go into effect on July 1.