Nonbank Mortgage Servicers May be Feeling the Regulatory Reach

Nonbank servicers are now servicing almost a quarter of the nation’s $9.9 billion in outstanding residential mortgage loans (about 24.2 percent) as of June 2015, having increased from 6.8 percent in 2012. What does this mean to the residential mortgage loan industry and the rise of non-bank servicers?

 

Banks and nonbank servicers are subject to different safety and soundness regulation and different capital rules. As a result, mortgage market participants and others have questioned the extent to which nonbank servicers may pose additional risk to consumers and the market and whether the existing oversight framework.

This rapid growth raises old fears given the financial crisis and housing collapse still fresh in our memories from a few short years ago. It has also caught the attention of the General Accounting Office (GAO) who is eyeing how existing regulatory oversight could be strengthened. Add into the mix nonbank servicers who are generally subject to oversight by federal and state regulators and monitoring by market participants, such as Fannie Mae and Freddie Mac.

 

 

In particular, Consumer Financial Protection Bureau (CFPB) directly oversees nonbank servicers as part of its responsibility to help ensure compliance with federal laws governing mortgage lending and consumer financial protection. However, CFPB does not have a mechanism to develop a comprehensive list of nonbank servicers and, therefore, does not have a full record of entities under its purview. As a result, CFPB may not be able to comprehensively enforce compliance with consumer financial laws.

As enforcement tightens up in this high growth segment the need to be compliant is going to increase and with this growing compliance requirement will come complexity driving the need for automation. How can we help?  360factors, Inc. helps companies improve business performance by reducing risk and ensuring compliance through its flagship software product Predict360. Want to learn more – give us a call, drop an email and we will get back to you shortly.

 

Source: dsnews.com

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