Non-Bank Servicing Share Forecasted to Grow

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A growing share of the nation’s residential loan servicing is expected to be handled by non-banks firms as regulatory scrutiny continues.

Greater regulation has become a significant operational burden for U.S. loan servicers. As a result, mortgage servicing costs have risen.

On the other hand, home-loan borrowers have benefited from the regulations because the quality of mortgage servicing has improved.

The findings were reported by Fitch Ratings based on comments made at a round table event by servicers of loans included in residential mortgage-backed securities.

“Regulation has made servicing transfers cleaner due to better data quality on in-flight loan modifications and loss mitigation efforts already undertaken by the prior servicer,” Fitch Ratings Managing Director Roelof Slump said in the statement.

According to the New York-based ratings agency, 89 percent of panelists at its round table agreed that non-bank servicers will continue to take market share from banks next year.

But the source of non-bank mortgage servicing rights growth is expected to change.

“Whereas MSR sales and subservicing had in the past driven servicing growth among non-banks, future activity will be driven by new loan origination activity by competitive non-banks who also service loans,” Slump explained. “Servicing sales from banks who want to reduce the associated regulatory impact on capital will also drive growth.”

Most attendees also felt that servicing technology improvements are needed in 2017 even though they are unhappy with current technology offerings. But the need to maintain compliance will drive technology spending, and technology costs are expected to grow as a result.


Mortgage Daily Staff


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