Nonbank Mortgage Servicer Prudential Standards
The CSBS Board of Directors has approved new regulatory standards to enhance and align states’ existing authority over the fast-growing area of nonbank mortgage servicing, which has grown from 6% to 60% of the government agency mortgage market in the past 10 years. The Board approved model state regulatory prudential standards for nonbank mortgage servicers on July 23, 2021.
As nonbank servicers became responsible for a larger share of consumer mortgages after the financial crisis, state regulators grew concerned about the absence of a uniform set of state standards addressing servicers’ capital and liquidity levels. In addition, both state and federal examinations of nonbank servicers identified inadequate corporate governance and board oversight.
These concerns led state regulators to pursue – and subsequently approve – new standards that will: ensure that nonbank mortgage servicers maintain the financial capacity, governance and risk management practices to adequately serve consumers and investors and simultaneously enhance market stability.
The requirements contained in the standards are only effective through state implementation. State agencies may use the standards to formulate law, rule, guidance or procedure under their individual jurisdictional authority or legislative process. The standards specify the importance of uniform adoption to regulate multistate entities and to minimize regulatory burden. To that end, CSBS will work to ensure that implementation among states is as uniform as possible.
Key highlights include:
- The standards focus on two main areas: financial condition and corporate governance.
- The standards align with existing federal minimum eligibility requirements, wherever practical, to minimize regulatory burden for servicers.
- The standards apply to servicers that service at least 2,000 loans and operate in two or more states and cover both agency and non-agency servicing.
- The standards do not apply to:
- small servicers that meet a de minimis cutoff
- reverse mortgage loan servicers
- not-for-profit mortgage servicers
- housing agencies
- The standards provide state agency commissioners with flexibility to increase requirements for high-risk servicers or even suspend the requirements in times of economic, societal or environmental volatility.
CSBS released the standards for public comment on Oct. 1, 2020, receiving comments from 17 organizations, including several industry groups. CSBS considered all comments and made determinations on each issue, which is summarized in the final standards.
The standards are one of eight priorities set for 2021 by state regulators to advance Networked Supervision, a strategy to create greater uniformity in state regulation while preserving local accountability.
Archived Public Comments
- Executive Summary
- Overview of the Nonbank Mortgage Servicing Industry
- Current Regulatory Environment
- Proposed Prudential Standards for Comment
- Questions to Prompt Public Comment
|American Bankers Association|
|Alston & Bird|
|Community Home Lenders Association||Word|
|Housing Policy Council|
|Independent Community Bankers of America|
|Manufactured Housing Institute|
|Mortgage Bankers Association|
|National Consumer Law Center|
|Union Home Mortgage|
Comments were due by December 31, 2020.
Please submit comments to [email protected].
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