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FEATURE additional management (e.g., collections) that delinquent loans require or to meet other new proposed CFPB requirements, so they sell these loans. However, it might be better in some instances to retain these loans, McDonald says, because then the lender can keep a closer eye on them rather than relying on someone to whom the servicing rights have been sold. If the loan goes bad, it's the lender, not the servicer, who has a liability issue. But several experts point out that the management of these loans require additional automation (e.g., for collection calls) and people (e.g., workout specialists) that may be too costly for some lenders. Ocwen, Nationstar, and some take on much more additional servicing, including specialized servicing, and don't have to concern themselves with some of the capital restrictions of depository bank lenders. Basel III Concerns B counts toward capital. The Federal Reserve Board asel III limits the amount that a servicing portfolio other firms, by contrast, have the excess technology and people to in June approved proposals that would raise banks' minimum capital requirement to 7 percent. The national implementation will start in January 2013, so any changes would need to be made before then and after the 90-day comment period on the proposal. U.S. banks had pushed the Fed to allow them to more heavily count mortgage servicing rights, but the June ruling followed the international agreement, so little, if any change, is expected. As a result, some of the attractive to companies like Ocwen and Nationstar as well as many others. Ocwen has nearly doubled nation's largest banks will be divesting servicing that exceeds the Basel III cap, focusing on securitized and distressed loans. Alverson expects some mid-tier banks to also seek to sell servic- ing rights either directly into the secondary market or to firms such as Nationstar and Ocwen Financial. McDonald adds that the smartest lenders are the ones keeping their own servicing or buying the servicing rights of others. Typically, the servicing rights purchaser will recoup the investment in a little more than three years, so any servicing income after that is profit, making such business the size of its servicing portfo- lio during the past 12 months. Following the release of the company's second-quarter earn- ings in June, Ron Farrus, the company's president and CEO, said the company is beginning to see more opportunity to expand loan servicing. Nationstar is following suit. Nationstar Mortgage LLC, the in- directly held, wholly owned sub- sidiary of Nationstar Mortgage Holdings, recently completed its acquisition of approxi- mately $63.7 billion in residential mortgage servicing rights from Aurora Bank FSB (f/k/a Lehman Brothers Bank) and its wholly owned subsidiary Aurora Loan Services LLC, a subsidiary of THE M REPORT | 29