GAO Recommends Greater Oversight of Nonbank Servicers

April 15, 2016

GAO Recommends Greater Oversight of Nonbank Servicers

On Monday, April 11, 2016, the Government Accountability Office (GAO) released a report stressing a need for greater oversight of nonbank mortgage service providers.  The GAO noted nonbanks now service roughly a quarter of all mortgages, but do not face the same level of oversight as banks.  According to the GAO, nonbanks serviced an estimated 24.2 percent of mortgages as of Q2 in 2015, up from just 6.8 percent in 2012.  Some nonbank servicers may be “susceptible to difficulties due to less mature infrastructures relative to banks for tasks such as managing regulatory compliance, risks and internal controls,” the GAO said.

In its report, the GAO urged Congress to give the Federal Housing Finance Agency (FHFA) the explicit authority to examine the activities of nonbanks that service loans purchased by Fannie Mae and Freddie Mac.  FHFA has indirect oversight of the nonbank servicers as the conservator of Fannie and Freddie, but no explicit right to examine the operations of these nonbank servicers.

The GAO also recommended the CFPB should compile a list of all nonbank servicers. The CFPB “does not have a full record of entities under its purview” and "may not be able to comprehensively enforce compliance with consumer financial laws," the GAO said.