Government Regulator Group Issues Standards for Non-Bank Mortgage Companies



The Conference of State Bank Supervisors presented banking prudential standards for the supervision of non-bank mortgage companies.

CSBS Board of Directors on Tuesday came out model standards that states can voluntarily adopt based on public feedback by the proposal it was released in 2020.

The standards are reminiscent of capital and liquidity requirements. proposed by the Federal Agency for Housing Finance on a mortgage serviced by state-owned enterprises Fannie Mae and Freddie Mac. While the FHFA standards only apply to Fannie and Freddie, the CSBS standards also take into account non-agency mortgages.

“The standards provide states with a uniform financial position and corporate governance requirements to regulate non-bank mortgage services while maintaining local accountability to consumers,” said CSBS President and CEO John Ryan.

According to CSBS, the standards were created to provide increased transparency and risk management requirements that ensure that non-bank service companies can maintain the financial capacity to serve consumers and investors in the event of a liquidity crisis.

CSBS has set a minimum net worth requirement of $ 2.5 million. in equity plus 25 basis points of outstanding principal on serviced home mortgages. Alternatively, nonbanks can also meet minimum net worth requirements if they adhere to FHFA’s requirements for seller-service organizations, CSBS said in a statement. Organizations servicing less than 2,000 loans will be tax exempt.

States can adopt standards through legislation or regulation. CSBS said it is working with states to ensure implementation is as consistent as possible.

“Companies that operate reliably and securely have much more room to meet the important requirements of servicing mortgages and helping clients meet these important financial obligations,” CSBS Chairman and Banking Commissioner said in a press release. Montana State Melanie Hall.

CSBS said it created the standards because of the massive growth of nonbanks, which now serve 60% of government-backed loans, up from 6% a decade ago.

Although CSBS has no rule-making or regulatory bodies, a national group of financial regulators from each of the 50 states, the District of Columbia, and parts of the United States have made significant efforts in recent years to streamline state supervision

Prudential standards are some of the eight priorities is related to what government regulators call advanced network supervision, a strategy to optimize non-bank licensing and supervision, and to expand the use of data-driven platforms in risk analysis.


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