Soaring Servicer Standards Likely
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By B OB N IEM I, BRAD L E Y
he new presilooking at new priorities, dential administhough not from changing adtration has been ministrations. Priorities mature confirmed, prias the evolution regulatory sysorities are being tems like the State Examination laid out, and all expectations System, Networked Supervision forecast a more aggressive and Standards for Nonbank Consumer Financial ProtecMortgage Servicers. State regution Bureau (CFPB) in the lators are the prudential regunext four years. The coronalator for nonbank mortgage BOB NIEMI virus pandemic has shown companies through the licenssome signs of improvement, ing and supervisory process, exbut variant strains are racing vaccine efforts aminations, consumer complaint resolution, while more American families are impacted. and when necessary, enforcement. The CFPB acting director stated the Bureau The State Examination System or SES has will increase its supervision and enforcebeen in development for several years and ment efforts to ensure that companies derecently has added a complaint management livering COVID-19 relief meet their legal system. Through the SES, state regulators obligations and are fully protecting families. share supervisory oversight while making Fair lending has also been announced as a the process more efficient using a single top priority. system for industry and regulator. ExamiState mortgage regulators likewise are nations allow regulators to monitor activ-
8 MORTGAGE BANKER | MARCH 2021
ity and compliance to determine whether a mortgage company is operating in a safe and sound manner. The use of a single system improves efficiency and increases collaboration between states. Networked supervision also focuses on combined efforts when licensing and renewing companies with shared review of data from the NMLS, company applications, and their financial documents. This ‘strategic approach’ is meant to leverage the collective intelligence from all state regulators. Yet, a trust gap still exists between the stated goals to reduce rather than increase regulatory burden and anxiety of wary licensees. Like both previous topics, the Proposed Regulatory Prudential Standards for Nonbank Mortgage Servicers were first developed in 2015 under my term as Ombudsman. The state driven effort was to develop enhanced examination standards for mortgage servicers and capital and liquidity baselines. In the years since opening the discussion, increased growth and coordination has occurred. Nonbank mortgage servicing has experienced rapid market share growth and complexity of operations. The new Prudential Standards cover areas including capital and liquidity, risk management, data protection standards, cyber risk, corporate governance, and change of control requirements. Also, increased coordination with federal agencies and the CFPB took place and inclusion of new examination processes related to forbearance and foreclosure responsibilities mandated by the CARES Act. Regulators have shared that these ‘baseline’ standards as the starting point for discussion. Yet Enhanced Standards and supervisory expectations for large entities have also been forecast for entities that require increase regulatory oversight. Application of prudential standards that beyond standards already in place through other federal agencies or guarantors. Regulators must balance the impact caused by heightened prudential standards on the cost and availability of credit for consumers. While all these are footsteps in the evolution of mortgage regulation and supervision, the trend is for growing pains and increased enforcement.
