Federal Reserve Governor Michelle Bowman remains “concerned about some of the differences in the prudential oversight of banks and nonbank” mortgage servicers, she said in a speech today. The speech returned to a theme of financial stability risks associated with nonbank servicers that Bowman raised in 2020 when the path of post-pandemic forbearance was less certain.
“As it turned out, nonbank mortgage servicers had cash to meet their operational needs. Mortgage refinancing surged because of the drop in long-term interest rates, and nonbank servicers used the proceeds from these refinancings to fund the advances associated with forbearance,” Bowman said.
However, she noted that had home prices fallen in the wake of the pandemic-induced recession, “many borrowers might have faced obstacles to refinancing because their homes had fallen in value, and so nonbank servicers would not have had revenue from refinancing to put toward paying advances.”
Bowman concluded that ongoing coordination among federal and state agencies to collect data, identify risk and strengthen oversight of nonbank services is “appropriate,” adding that “for this system to be sustainable . . . I think like activities should be treated in a like manner.”