Non-Bank Mortgage Servicers Should Expect Increased Regulator Scrutiny

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Treliant Takeaway: 

Treliant works to assist our clients in focusing on regulatory compliance, promoting operational best practices, and meeting  strategic and operational  objectives.  Treliant can help address compliance issues, establish process improvement action plans, and assess changing mortgage servicing regulations and current trends noted in the industry.  Treliant can assist you with assessing your operational processes and determining a plan to address the process, risk assessment, and documentation needs of your organization.  Treliant has professionals with extensive mortgage industry experience and can assist in assessing current operational performance with future expectations.

Article Highlights:

The current sentiment in the mortgage industry is that 2022 will see an increase in the number and depth of regulatory reviews performed throughout the year.  According to Fitch ratings, non-bank mortgage servicers will also see the increase as pandemic-related government forbearance programs expire and borrowers become eligible for loss mitigation alternatives or continue to remain in default.   According to Fitch, “The Consumer Finance Protection Bureau has prioritized mortgage servicing oversight under the new administration.”

Servicers may see the reintroduction of the Federal Housing Finance Agency’s (FHFA) net worth, liquidity and capital requirements.

Noted high-lights related to the COVID-19 pandemic since March 2020:

  • 8 million homeowners enrolled in some sort of assistance;
  • Nearly 6 million homeowners have successfully completed these programs; and
  • These programs played a major role in keeping the 30-day delinquency transition rate down:
    • The delinquency rate fell from 3.4% in April 2020 to 0.7% in October 2021;
    • The national delinquency rate was 3.38% in December;
    • Loans in active foreclosure were at an all-time low in December 2021;
      • The rate of foreclosure stood at 0.24% with 4,100 foreclosure starts.

In the near term, Fitch is expecting foreclosure activity and the level of regulatory review  to increase during the year.