Fitch Ratings analysts predict a much smaller mortgage servicing industry after the Consumer Financial Protection Bureau finalizes its latest rules.
"A key change with the CFPB rules is their extended scope, as they will govern both banks and nonbanks of all sizes and types," analysts said in a report Monday. "While these changes should be manageable for larger banks, Fitch Ratings believes their impact will be most directly felt by smaller institutions due to the higher impact of compliance costs."
The bureau will likely exclude servicers with 1,000 or fewer loans, but nearly 13,000 servicers will be subject to the new standards, according to estimates.
Fitch said larger firms will continue to scale down their portfolios to avoid higher scrutiny and compliance risks, while the smaller firms will be forced to sell or merge with other servicers because of the increased costs.
Still, the rules are positive for investors, who've been dealing with sizeable foreclosure timelines and delays since the foreclosure crisis struck.
"In general, Fitch views the proposed rules positively as they should improve the consistency and quality of servicing in the industry and may ultimately foster greater confidence in the sector," the ratings agency said.