A report by the Federal Housing Finance Administration-Office of the Inspector General says, “The nonbank special servicers do not have the same capital requirements as a bank, which means they are more susceptible to economic downturns. Such downturns could substantially increase nonperforming loans that require servicer loss mitigation while at the same time impact the ability of the servicer to perform.”
According to housingwire, in a letter to the GAO, along with Congressman Elijah Cummings (D-MD), they say, “We are writing to request a study of the vulnerability of nonbank mortgage servicers to economic downturns given the lack of capital requirements applicable to these servicers and of the risks posed to consumers by continued growth in nonbank specialty mortgage servicing.”
A recent report from Fitch Ratings says of all private-label securities by loan count, nonbanks now service 74 percent, an increase from 48 percent in 2004, and nearly all of the 74 percent is in the hands of the top five nonbank servicers. Ocwen Loan Servicing, Nationstar, Select Portfolio Servicing, Green Tree Servicing and PHH Mortgage Corp. hold 64 percent of all non-agency servicing. Fitch Managing Director Roelof Slump said, “Nonbank servicers have grown significantly through the sale and transfer of difficult-to-service loans from large banking institutions.”
New York Department of Financial Services Superintendent Benjamin Lawsky says Ocwen backdated letters to possibly hundreds of thousands of borrowers. “In many cases, borrowers received a letter denying a mortgage loan modification, and the letter was dated more than 30 days prior to the date that Ocwen mailed the letter,” Lawsky writes. “These borrowers were given 30 days from the date of the denial letter to appeal that denial, but those 30 days had already elapsed by the time they received the backdated letter.”
Ocwen apologized for the errors in their correspondence system, saying of the 283 borrowers in New York who received letters with incorrect dates, 281 continue to be borrowers. However, Moody’s, Bank of America and Evercore Partners downgraded Ocwen’s ratings, and company stock fell 20 percent. As MHProNews has learned, the stock remains 20 below the initial reading one week later. ##
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