Alert May 13, 2014

Financial Stability Oversight Council’s Annual Report Highlights Problems with Non-Bank Mortgage Servicers

As required by Section 112(b)(2) of the Dodd-Frank Act, the Financial Stability Oversight Council released its 2014 Annual Report, which included, among other things, recommendations to address the risks posed by nonbank mortgage servicers. The report highlights that in recent years a larger amount of mortgage servicing rights have been sold to nonbank mortgage servicing companies that up until recently have not been subject to regulation by the CFPB and prudential standards at the state level. In light of recent problems with nonbank mortgage servicers (see December 23, 2013 Alert and March 4, 2014 Alert), the FSOC recommends that, in addition to continued monitoring, state regulators work together to develop prudential and corporate governance standards to strengthen nonbank mortgage servicers, in collaboration with the CFPB and Federal Housing Finance Agency.