Mortgage

State regulatory group publishes requirements for non-bank mortgage service suppliers

The Conference of State Banking Supervisors unveiled bank-style supervisory standards for overseeing non-bank mortgage administrators.

The board of the CSBS published the model standards on Tuesday, which states can voluntarily adopt after taking into account public feedback on a proposal from 2020.

The standards are similar to the capital and liquidity requirements proposed by the Federal Housing Finance Agency for mortgages serviced for state-sponsored companies Fannie Mae and Freddie Mac. Although the FHFA standards only apply to Fannie and Freddie, the CSBS standards also consider non-agency mortgages.

"The standards provide a uniform set of financial and corporate governance requirements for regulating non-bank mortgage servicers across states while maintaining local consumer accountability," said John Ryan, President and CEO of CSBS.

The standards were created to create increased transparency and risk management requirements that ensure non-bank service providers can maintain financial standing to serve consumers and investors in the event of a liquidity crisis, CSBS said.

CSBS set minimum net wealth requirements of $ 2.5 million in principal plus 25 basis points of unpaid principal on serviced residential mortgage loans. Alternatively, non-banks can meet the minimum wealth requirements if they adhere to the FHFA's requirements for seller-service providers, CSBS said. Companies that service fewer than 2,000 loans are excluded.

States can adopt the standards either through laws or regulations. CSBS said it is working with states to ensure implementation is as consistent as possible.

"Organizations that operate safely and soundly are much better placed to meet the significant requirements associated with servicing mortgage loans and helping customers with these important financial obligations," said CSBS Chairman and Montana Banking Commissioner Melanie Hall in a press release.

CSBS said it created the standards due to the massive growth of non-banks, which now service 60% of government-supported credit, up from just 6% a decade ago.

Although the CSBS does not have a rulemaker or regulator, the national group of financial regulators from each of the 50 states, the District of Columbia, and some US territories has made major efforts in recent years to streamline state oversight.

Regulatory standards are one of eight priorities related to what government regulators refer to as networked prudential supervision, a strategy to streamline non-bank authorization and oversight and expand the use of data-driven platforms in risk analysis.

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