State Regulators Propose Prudential Regulatory Standards for Non-Bank Mortgage Servicers


Washington D.C. – The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) today issued for public comment Proposed Regulatory Prudential Standards for Non-bank Mortgage Servicers.  The proposal is now open for a 90-day public comment period.

As the regulatory authorities of non-bank mortgage servicers, state regulators are well positioned to design and implement a comprehensive prudential regulatory framework for non-bank mortgage servicers.  State regulators have experience with and a responsibility for a diverse range of depository and non-depository financial services providers.

After an extensive review of the current mortgage servicing industry to better understand its functions and impacts on financial markets and consumers, CSBS and AARMR have determined that increased state prudential regulation of non-bank mortgage servicing companies would help achieve the following goals:

  • Provide better protection for borrowers, investors, and other stakeholders;
  • Enhance effective regulatory oversight and market discipline over non-bank mortgage servicers; and
  • Improve transparency, accountability, risk management, and corporate governance standards.

“In recent years, non-bank mortgage servicers have grown in size, complexity, and importance,” said CSBS President and CEO John W. Ryan.  “These firms provide critical services to homeowners and investors, and the mortgage finance system as a whole.  State regulators have primary credentialing and licensing authority over these non-bank mortgage servicers, and are working to ensure our regulatory expectations are well-defined and provide for a safe and sound industry.  The proposed prudential standards are integral to this effort.”

State regulators are proposing a set of Baseline Prudential Regulatory Standards (Baseline Standards) to be applied to all non-bank mortgage servicers licensed by and operating in the states.

To the extent possible, the Baseline Standards will leverage existing standards or generally accepted business practices.  These Baseline Standards cover eight areas: capital; liquidity; risk management; data standards; data protection (including cyber risk); corporate governance; servicing transfer requirements; and change-of-control requirements.

The proposal also includes Enhanced Prudential Standards that may be appropriate for large, complex non-bank mortgage servicing companies.  The proposed Enhanced Prudential Standards would deploy enhanced planning, modeling, metrics and audit for: capital; liquidity; stress testing; and living will and recovery and resolution plans.

“The non-bank mortgage servicing industry is very diverse, ranging from very small firms with straightforward operations to large and complex entities with multiple business lines,” said Rod Carnes, President of AARMR and Deputy Commissioner for Non-Depository Financial Institutions of the Georgia Department of Banking and Finance.  “By relying upon existing standards and generally accepted business practices, we hope to minimize regulatory burden for small, less complex firms, while still incorporating a comprehensive regime that maintains safety and soundness and consumer protection for even the largest, most complex firms.”

The Proposed Regulatory Prudential Standards for Non-Bank Mortgage Servicers are available here.


CSBS announced in October 2014 the formation of a Mortgage Servicing Rights Task Force with state regulators from California, Illinois, Massachusetts, Minnesota, New York, Pennsylvania, South Dakota, Texas, and Washington.  The goal of the Task Force is to develop options for prudential standards for non-bank mortgage servicers.  This is in response to significant growth in recent years of the mortgage servicing assets in non-depository servicers.  As these entities are licensed and regulated by some states, the Task Force has been analyzing this growth, examining the current mortgage servicing market, and developing recommendations for prudential standards.  More information on the Mortgage Servicing Rights Task Force is available here.


CSBS Media Contacts: 
Catherine Woody, Vice President of Media and Industry Relations, " target="_blank"> or 202.728.5733
Rockhelle Johnson, Senior Manager of Communications, " target="_blank"> or 202.407.7156
Matthew Longacre, Manager of Communications, " target="_blank"> or 202.803.8091

About CSBS:
The Conference of State Bank Supervisors (CSBS) is the nationwide organization of banking regulators from all 50 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.  State banking regulators supervise over 5,000 state?chartered financial institutions.  Further, most state banking departments also regulate a variety of non-bank financial services providers, including mortgage lenders.  For more than a century, CSBS has given state supervisors a national forum to coordinate supervision of their regulated entities and to develop regulatory policy.  CSBS also provides training to state banking and financial regulators and represents its members before Congress and the federal financial regulatory agencies.

About AARMR:
The American Association of Residential Mortgage Regulators (AARMR) is the national organization representing state residential mortgage regulators. AARMR’s mission is to promote the exchange of information and education concerning the licensing, supervision and regulation of the residential mortgage industry, to ensure the ability of state mortgage regulators to provide effective mortgage supervision for a safe and sound industry meeting the needs of the local financial markets and to protect the rights of consumers.

Previous articleGardner, Coons, Welch, Kinzinger Introduce Bipartisan Energy Efficiency Legislation
Next articleHines Sells Azure Multifamily Asset in St. Petersburg