A Government Accountability Office report released Monday indicates that the number of nonbank firms servicing mortgages in the U.S. is growing but the Consumer Financial Protection Bureau - the agency charged with protecting borrowers - does not have an accurate count of those companies.
The GAO, an independent watchdog that audits federal programs and agencies, is concerned that the CFPB lacks “comprehensive data on the identity and number of nonbank mortgage servicers in the market.”
The GAO performed the review at the request of two Democrats - Rep. Elijah Cummings of Maryland and Sen. Elizabeth Warren of Massachusetts - who have raised concerns about tightening Wall Street regulation after the financial crisis. Both responded to the GAO findings by calling for the CFPB to collect data and strengthen oversight of servicers.
“Some borrowers lost contact with their servicers, and their new servicers did not always receive or adhere to borrowers' existing loss mitigation agreements with the previous servicer,” the GAO found. "In some cases, these types of transfer errors may have resulted in some borrowers improperly losing their homes to foreclosure.
"Collecting information on and regulating nonbank mortgage services to protect consumers is well within CFPB's statutory authority and core mission. We hope that you take actions to do so as rapidly as possible,” GAO officials wrote to CFPB Director Richard Cordray.
While nonbank servicers still do not hold as great a market share as banks, their influence is growing, the GAO found.
In the second quarter of 2015, Wells Fargo, the largest U.S. mortgage servicer, commanded 17.1% of the market, compared with 18% in the first quarter of 2012, the report said.
Nationstar Mortgage LLC, which was not listed as a top 10 servicer in 2012, ranked fourth in 2015 with a 4.1% market share that exceeded that of Citi or PNC Mortgage.
The report stated that while there are benefits to having nonbanks service mortgages, there also are risks that can fall between the regulatory cracks. During some transfers of mortgages, firms have lost documents or not credited borrowers' payments on loans, the GAO found.
"Issues related to aggressive growth and insufficient infrastructure have resulted in harm to consumers, have exposed counterparties to operational and reputational risks and ... complicated servicing transfers between institutions,” the report stated.
