In a letter last week to the Federal Housing Finance Agency, the American Bankers Association commented on the re-proposed update to standards that mortgage lenders would have to meet to sell loans to or service loans on behalf of Fannie Mae and Freddie Mac. The update also includes requirements for servicing Ginnie Mae mortgages.
To ensure long-term stability of the enterprises and the housing market, “it is critical to evaluate the adequacy of the net worth and capital ratio requirements for non-depository seller/servicers,” ABA wrote. “While many nonbank mortgage servicers may have started as specialty/default servicers, they now operate with similar business models as large, bank-owned mortgage originator/servicers—but without the strict regulatory regime that governs depositories.”
Under the proposal, sellers and servicers would be required to maintain a base net worth of $2.5 million plus 35 basis points of the unpaid principal balance for Ginnie Mae servicing and 25 basis points of the unpaid principal balance for all other 1-to-4-family loans serviced. Depository institutions would continue to rely on their prudential regulatory standards to meet the GSEs’ capital and liquidity requirements. The proposal includes feedback from a January 2020 proposal, as well lessons from the pandemic.
ABA recommended that updated eligibility standards for nonbank mortgage servicers should be imposed with “reasonable phase-in periods” to give institutions time to comply with enhanced capital and liquidity reserves. “ABA believes it is appropriate that these standards are strengthened, but the policy objective is, and should remain, to enhance systemic safety and soundness, not to inadvertently force firms to end participation for inability to comply.”
