A&B Abstract: The Conference of State Bank Supervisors (“CSBS”) proposed regulatory prudential standards (the “Standards”) to develop a consistent regulatory structure of nonbank mortgage servicers.  Comments on all aspects of the Standards are encouraged by December 31, 2020.

Background:

Since the financial crisis, the rapid growth of mortgage bank mortgage servicers has led regulators to call for the enhanced oversight of such entities.  The Financial Stability Oversight Council (charged under the Dodd-Frank Act with identifying risk to the stability of the U.S. markets) recommended in its 2014 and 2019 annual reports that state regulators work collaboratively to develop prudential and corporate governance standards. Earlier this year, the Federal Housing Finance Agency (FHFA) proposed new financial eligibility requirement for nonbank servicers doing business with Fannie Mae and Freddie Mac.

In 2015, state regulators working through the Mortgage Servicing Rights Task Force proposed baseline and enhanced prudential regulatory standards (including capital and net worth requirements) for nonbank mortgage servicers.  Although those standards were not finalized,…

Read More…

The Conference of State Bank Supervisors (CSBS) recently requested public comment on proposed regulatory prudential standards for nonbank mortgage servicers. The proposal seeks to address concerns about rapid market share growth, nonbank institution size, and nonbank mortgage servicers’ financial stability and governance. The goals of the proposal are to:

• Provide better protection for borrowers, investors, and other stakeholders in the occurrence of a stress event, in which adverse circumstances affecting one or a series of companies—or alternatively, a wider market dislocation—could result in harm;
• Enhance effective regulatory oversight and market discipline over these entities; and
• Improve transparency, accountability, risk management, and corporate governance standards.

The proposal includes a set of baseline and enhanced prudential standards that are to be applied to nonbank mortgage servicers and investors in mortgage servicing licensed by and operating in the states.

1. The Baseline Prudential Standards cover eight areas, including capital, liquidity, risk management, data standards and integrity, data protection (including cyber risk), corporate…

Read More…

On October 1, the Conference of State Bank Supervisors (CSBS) requested public comment on proposed regulatory prudential standards for nonbank mortgage servicers. According to CSBS, the proposal is being issued to address concerns about nonbank mortgage servicers, including the rapid market share growth, institution size, and financial stability and governance. The goals of the proposal are to (i) “[p]rovide better protection for borrowers, investors and other stakeholders in the occurrence of a stress event. . .[that] could result in harm”; (ii) “[e]nhance effective regulatory oversight and market discipline over these entities”; and (iii) “[i]mprove transparency, accountability, risk management and corporate governance standards.” Highlights of the proposal include:

• Baseline Standards. CSBS notes that the baseline standards, which cover eight areas—capital, liquidity, risk management, data standards and integrity, data protection/cyber risk, corporate governance, servicing transfer requirements and change of control—will represent regulatory requirements for state-licensed nonbank mortgage servicers and will “leverage existing standards or generally…

Read More…

The Conference of State Bank Supervisors (CSBS) said they are seeking public input on proposed regulatory prudential standards for nonbank mortgage servicers, as the state-regulated industry covers an increasing share of this market.

The proposal intends to: Provide better protection for borrowers, investors and other stakeholders in the occurrence of a stress event that could result in harm; enhance effective regulatory oversight and market discipline over these entities; and improve transparency, accountability, risk management and corporate governance standards.

The public comment period runs today through December 31.

CSBS President and CEO John W. Ryan said now that nonbank mortgage servicing accounts for more than half of the agency market, a “common standard for assessing these entities’ safety and soundness and corporate governance” is more critical than ever.

“We look forward to receiving industry and stakeholder input as we craft final standards that enable robust oversight that balances consumer protection, prudential regulation and market viability.”

In a press release, the CSBS lists the following “main components” of the proposal:

• A…

Read More…