Setting The Stage

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Th e M Rep o RT | 41 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SERVICING The laTesT cFPB reform Bill moves through House Legislators continue to push to change how the agency operates. s ome changes may be on the horizon for the Consumer Financial Protection Bureau (CFPB). The U.S. House of Representatives passed H.R. 3193, the Consumer Financial Freedom and Washington Accountability Act, which would bring more "accountability and transparency" to the agency, according to Rep. Sean Duffy (R-Wisconsin), the bill's sponsor. The bill passed the House with a vote of 232-182. H.R.3193 is a collection of bills that aims to bring more oversight to the CFPB. Included in the bill are provisions to replace the CFPB director with a five-member commission appointed by the president and confirmed by the Senate. The bill would also align CFPB's governance with other, similarly-charged government agencies that protect consumers and investors. "This is the right thing to do. Let's empower Congress and the American people. Let's reform the CFPB and actually make it work," Rep. Duffy said in a press release. Additionally, the bill would separate CFPB into a stand-alone agency rather than a bureau with- in the Federal Reserve System. The bill, "[p]rohibits the CFPB from using a consumer's private, personal financial information without the consumer's knowl- edge and consent. The CFPB is currently engaged in a mas- sive, multi-million dollar data collection effort of consumers' financial information," according to a press release issued from Duffy's office. The bill now heads to the Senate for consideration. analysts Warn of next generation of subprime lenders Could today's special servicers be tomorrow's subprime kings? i n a report spurred by recent remarks on practices at non-bank servicers, analysts at Moody's Investors Service took the opportunity to express their concerns about the dra- matic growth of these firms. Referring to a recent speech in which Benjamin Lawsky, super- intendent of financial services for New York, urged regulators to "halt the explosive growth in the non-bank mortgage servicing in- dustry" when warranted, Moody's analysts Warren Kornfeld and Jason Chung noted they them- selves have held worries about growth at large servicers—albeit for slightly different reasons. "We have regularly cited the special servicers' extraordinary growth as a key credit con- straint, given the operating risks associated with the complex integration of acquired mortgage servicing rights and the potential for deterioration in servicing metrics," the analysts said in the agency's latest ResiLandscape report. In fact, Kornfeld and Chung said, if Lawsky's speech, and his halting of a major mortgage servic- ing rights deal between Ocwen and Wells Fargo, "signals a more general moderation in the rapid growth of the special servicers, it would be credit positive." At the same time, they worry companies might attempt to offset any slowdown in growth by shifting business models and originating non-prime mortgages, "a net credit negative." "We have said that Ocwen and the other special servicers could become the next generation of non-prime originators, given their wealth of non-prime servicing experience along with the cyclical, low- margin nature of prime mortgage originations," they wrote. "But originating non-prime loans increases legal risks and performance volatility." Although non-prime loan volume remains low, Moody's expects the market to redevelop "with active participation by special servicers."

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