The current regulatory framework could be strengthened to give the Federal Housing Finance Agency and others greater supervisory authority over nonbank mortgage servicers, according to a report released today by the Government Accountability Office. The report pointed out that the share of home mortgages serviced by alternative lenders has risen in recent years — up from 6.8 percent in 2012 to 24.2 percent in 2015. Given that, the GAO recommended that Congress consider granting the FHFA greater latitude to examine these entities, and that the Consumer Financial Protection Bureau collect more data on the identity and number of nonbank servicers.
While nonbank servicers are subject to oversight by federal and state regulators, as well as monitoring by the GSEs, the report highlighted several limitations. The CFPB, for example, has authority to examine these entities to ensure compliance with consumer protection standards, but lacks a comprehensive record of all nonbanks under its supervision. As a result, the bureau may not be able to adequately ensure compliance with consumer protection laws, the GAO said.
The report pointed out that the growth in nonbank servicing has had some positive effects on the market, including a greater capacity to service delinquent loans and increased liquidity in the secondary mortgage market — although it added that banks have “increased their propensity” for offering modifications and payment reductions. However, the GAO added that the increase in nonbank servicers poses consumer risks, which has generated a need for closer regulatory scrutiny.
