While the CFPB and state regulators have some authority over these companies, many of them are not currently subject to prudential standards such as capital, liquidity, or risk management oversight. Further, in many cases, mortgage investors’ ability to collect on mortgages is dependent on a single mortgage servicing company, where failure could have significant negative consequences for market participants.
ABA has long expressed concern to regulators that Basel III’s punitive treatment of mortgage servicing assets on bank books was driving the MSA business to entities not subject to the same prudential oversight.
The FSOC's annual report offered several other recommendations for greater stability, including increasing private activity in the mortgage market, raising awareness of interest rate risk, finalizing rules on money markets and resolving long-run fiscal imbalances.
Read the report.