January 2016 - Out of the Woods

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TH E M R EP O RT | 51 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 revised Basel III capital rules that went into effect this year are now limiting the amount of an MSA that can be counted toward this total. Also under the new regula- tory environment, the MSA's risk- weight included in the capital will spike by about 2.5 times. "These two changes—limiting an MSA's use as regulatory capi- tal and increasing the asset's risk weight—make it more challenging for banks to achieve target capital ratios, especially in the required CCAR and DFAST stress tests. At present, these changes don't appear to place the largest banks at risk of falling below their target capital levels," the Freddie Mac report stated. "However, some mid-sized banks with large mortgage opera - tions may have to reduce their holding of MSAs, increase their holdings of other types of capital, or reduce their assets to maintain their desired capital ratios." Those three factors have resulted in the following changes in the structure of the servicing industry, according to Freddie Mac: • A reverse in the decades-long trend of consolidation. Smaller servicers now handle the majority of mortgage servicing. In 2001—seven years before the crisis—the top five servicers handled 37 percent of servic - ing; at the peak of the crisis in 2009, that share swelled to 59 percent. By 2015, it was back down to 40 percent. • An increase in the share of mortgage servicing handled by nonbanks. Among the top 20 servicers in 2009, nonbanks accounted for 9 percent of the servicing; that share had more than doubled—up to 19 per - cent—five years later in 2014. • Growth in subservicing, and specialty servicing has become a significant sector in servicing overall. Some of the sub-areas in which subservicing is be- coming increasingly specialized are servicing non-performing loans, servicing loans that are likely to be modified, or focus- ing on loans that are likely to end in foreclosure, according to Freddie Mac. CFPB Complaints About Ocwen Decline, While Nationstar's Rise Mortgage grievances outweigh debt collection, credit reporting, and more. T he November volume of the Consumer Fi- nancial Protection Bu- reau's (CFPB) monthly complaint snapshot highlight- ed one of its top three most complained-about financial products: mortgages. In October 2015, the Bureau received 24,300 complaints, and 4,685 of these were mortgage-re- lated, making it the third most complained-about category from August to October 2015. During the same period last year, mort- gage complaints totaled 4,317. Mortgages were most complained about at Ocwen and Nationstar Mortgage, occupying nearly all of the CFPB's complaints for October. However, Ocwen's complaints have fallen 16 percent overall from August to October 2014 to the same period this year, while Nationstar's complaints have risen 11 percent. Wells Fargo, Bank of America, and JPMorgan Chase also had a significant number of mortgage-related complaints. Ocwen Financial Corporation recently made headlines when the com - pany failed four metrics and was deemed to have failed seven others in an independent settlement monitor's review of its residential mortgage loan portfolio for the second half of 2014, according to the monitor's report filed with the U.S. Court for the District of Columbia. But one reason for the turn - around in complaints could be that Ocwen is addressing the issues that the monitor pointed out. "The monitor's report con - firms continued confidence by the OMSO (Office of Settlement Mortgage Oversight) in the changes we have made to our Internal Review Group func - tion, the qualifications and process around our metrics testing, and discusses our state of compliance with the National Mortgage Settlement," Ocwen spokesman John Lovallo said in an email to MReport. "The spe - cific metrics mentioned in this report are from the third and fourth quarters of 2014, and not a reflection of our current op - erations. They have all been ad- dressed with Corrective Action Plans approved by OMSO and implemented by Ocwen in 2015. We also note that the monitor's report specifically discusses that Ocwen has cured its potential violation regarding termination of lender-placed insurance and passed that metric during the cure period in the fourth quar - ter of 2014." He continued: "Ocwen is committed to being fully compliant with all rules and regulations related to our busi - ness, and we continue to invest in our risk and compliance management systems. We will continue to work closely with the monitor and look forward to the next report." Nationstar also made head - lines when the company agreed to pay $77 million to settle class- action suits filed by homeown- ers over the alleged inflating of insurance rates, according to media reports. The Nationstar settlement, combined with a similar lawsuit against Ocwen Loan Servicing (part of Ocwen Financial Corp.) that was settled in September, mean the two servicers will pay a combined total of $217 million to more than 1 million homeowners. On a positive note, the CFPB reported that mortgage complaints fell 0.6 percent from the prior month. Overall complaints are up 6 percent month-over-month. In total, the CFPB has handled about 749,400 complaints as of November 1, 2015. According to the report, mortgage complaints totaled 201,946, the highest complained item thus far, followed by debt collection and credit reporting. "Debt collection, credit reporting, and mortgage complaints continue to be the top three most-complained- about consumer financial products and services, collectively representing about 66 percent of complaints submitted in October 2015, the report stated. According to the CFPB, Idaho, Arkansas, and Nebraska have the highest complaint volume increases year-over-year at 66 percent, 42 percent, and 41 percent, respectively. The lowest complaint volume percentage increase came from Alaska (-12 percent), Delaware (-5 percent), and Florida (1 percent), the data showed.

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