Nonbank mortgage servicers, which now originate two-thirds of all U.S. mortgages and hold servicing rights on over half of mortgage balances, have grown significantly since the 2008 financial crisis. They are crucial for serving underserved borrower groups but are susceptible to economic shocks due to their heavy reliance on market conditions and lack of liquidity.The FSOC report highlights the risks these companies pose to financial stability, noting that they are not subject to the same regulatory scrutiny as banks despite similar risks. The report recommends that Congress enhance the authority of the Federal Housing Finance Agency (FHFA) and Ginnie Mae to set and enforce safety and soundness standards, and improve liquidity through measures such as expanding the Pass-Through Assistance Program (PTAP) (Consumer Financial Protection Bureau).Mortgage trade groups have mixed reactions to the recommendations. While some support the call for greater liquidity backstops, others argue that additional regulations could increase costs and reduce competition, potentially raising borrowing costs and limiting credit availability.
