Mortgage service regulations have not yet fully caught up with significant industry changes over the past five years, according to an Urban Wire blog post by the Urban Institute and author Karan Kaul.
In her post, Kaul summarizes the key topics discussed during a recent Housing Finance Policy Center (HFPC) seminar centered around mortgage servicing trends and moderated by CoreLogic’s Faith Schwartz. The panel Schwartz moderated including Michael Drayne, SVP at Ginnie Mae, Stephen Fleming, SVP at Phoenix Capital, and Laurie Goodman, HFPC director, among others.
According to Kaul, topics discussed by the panel included the rise of non-bank mortgage servicers; the difference between non-bank servicers and large bank servicers; and the hot-button topic of industry reaction to current regulations.
Under the topic of regulation, Kaul notes that one of most important takeaways was that due to “regulatory uncertainty and a broken servicer and compensations model access to credit is tight.” Kaul cites statements made by Goodman during the seminar that the high cost of servicing non-performing mortgages and regulatory uncertainty regarding the treatment of delinquent borrowers have made lenders cautious of making loans, even if the risk of default is slim. Other factors such as long foreclosure delays in judicial states, onerous, and arcane foreclosure guidelines, and at times different servicing requirements from different regulators have only made it more difficult to obtain credit.
Mortgage servicing regulation is a difficult regulation to control, Kaul notes. Improper foreclosures, the robo signing scandal and servicer settlements with government authorities are all real borrower concerns. Conversely, a regulations that are inconsistent, overly prescriptive, and poorly targeted also drives lenders away and creates uncertainty. This pushes lenders away from low-income and less creditworthy borrowers.
To see the full blog post and seminar takeaways, visit: Edit.Urban.org