The Mortgage Bankers Association and PricewaterhouseCoopers today announced the release of The Changing Dynamics of the Mortgage Servicing Landscape, a white paper addressing the current state, and history, of mortgage servicing.

The white paper describes the changes that have occurred in the mortgage servicing market to get us to where we are today.  It also discusses how increasing servicing costs can impact the price that consumers pay at origination and highlights the trends that have led to non-bank servicers gaining an increasing market share in recent years.

“Non-bank servicers are a critical component of the real estate finance industry and their recent growth reflects a normal cyclical change in the marketplace,” said David Stevens, President and CEO of MBA. “This whitepaper will help educate stakeholders and policymakers about mortgage servicing, in hopes of that they will better understand the market dynamics as they make policy decisions and recommendations going forward.”

“Mortgage servicing remains a dynamic and critical component of the financial services industry. For industry participants, it’s critical that the flexibility exists to adapt business models and strategies when the markets dictate change,” commented Roberto Hernandez, principal, PwC US.

Additionally, this whitepaper provides a summary of the regulatory framework that applies to both bank and nonbank servicers as well as a perspective on two areas that have recently generated regulatory interest: mortgage servicing transfers and servicer net worth, capital and liquidity requirements.

Key findings of the paper include:

  • Non-bank mortgage servicers in the top rankings are not a new phenomenon.  In the late 1980s and early 1990s, non-depository mortgage bankers were major players in the servicing market.

     
  • While banks and non-banks have differences in how they finance operations and whether they hold deposits, all mortgage entities are subject to the same consumer-related regulatory requirements with differing prudential requirements.

     
  • Banks still hold the majority of the mortgage servicing assets in the country, while the five largest non-bank servicers have seen their market share grow significantly.

     
  • Regulators and guarantors with different oversight responsibilities have enhanced rules around consumer facing conduct, operational requirements and capital and liquidity in recent years.  The impacts of these changes are not limited to servicers.  Consumers are also impacted by servicing due to the interplay between servicing costs and upfront loan pricing.

The full report is available for download here.