TheMReport — News and strategies for the evolving mortgage marketplace.
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42 | Th e M Rep o RT 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 State regulators launch mortgage Servicing rights task Force Growth of non-bank servicers has financial supervisors questioning mortgage standards. a group of state bank regulators is forming a task force to develop new mortgage servic- ing standards for non-bank firms, according to an announcement released in late October. In its statement, the Conference of State Bank Supervisors (CSBS) said it established the task force as a response to the explosive growth of non-bank servicers like Ocwen Financial and Nationstar Mortgage, both of which have moved to snap up servicing rights from depository firms and climb the ranks of the nation's biggest outfits. As regulatory standards have become more burdensome, many of the country's largest banking firms have offloaded portions of their servicing portfolios to these non-bank companies, which operate in a less stringent environment. These movements—and the growth of the companies tak- ing over that business—have captured the attention of some financial supervisors, including Benjamin Lawsky, New York's superintendent of financial ser- vices, whose office has gone after Ocwen and Nationstar with al- legations of borrower abuses and improper business practices. With the formation of its new task force, CSBS says it hopes to analyze recent growth and devel- opments at non-bank servicers, including corporate governance, operational risk, and changes to fi- nancial capacity since the mortgage crisis. Through its study, the group seeks to formulate recommenda- tions for prudential standards for this segment of the industry. "These firms provide a critical function in our housing finance system," CSBS said in its release. "It is important for the states to understand how this growth should inform changes to the regulatory framework." Throughout the process, CSBS says it will engage with industry participants, federal agencies, and other stakeholders. "There have been significant changes in mortgage finance following the mortgage crisis," said John W. Ryan, CSBS president and CEO. "As the industry continues to change and policymakers con- template housing finance reform, it is important we provide an appropriate regulatory framework to instill market confidence and ensure consumer protection." A number of financial regula- tors and supervisors from vari- ous states have been appointed to the task force, including representatives from South Dakota, Texas, Minnesota, and Massachusetts, among others. Lawsky is absent from the list, though New York's Department of Financial Services will be rep- resented by its executive deputy superintendent, Dan Burnstein. The group anticipates deliver- ing an initial report to CSBS' board of directors in early December.