US Housing Regulator Proposes Rules for Nonbank Mortgage Firms

Written By: Glenn Michaels, Op-Ed Writer

If you are employed by a mortgage banking company and the company you are employed by is not owned or operates as a bank that does not take depositors money then you are employed by a “nonbank” mortgage firm.

Recently the US regulator of Fannie Mae and Freddie Mac proposed new eligibility rules for nonbanks selling or servicing mortgages backed by the government controlled mortgage agencies.

These nonbank mortgage firms will be required to have a minimum net worth of $2.5 million plus a quarter percentage point of the outstanding principal of loans they service, the Federal Housing Finance Agency said in a statement.

The nonbanks will also need to have a minimal capital ratio of 6 percent of assets to net worth and keep liquid assets based on the volume of Fannie Mae and Freddie Mac they are servicing and the amount of nonperforming loans.

The regulator said it plans to finalize the new requirements by the second quarter, with them going into effect by the end of the year.

The nonbank mortgage servicing industry has come under regulatory scrutiny for a range of irregularities in the servicing of loans. A group of investors recently took the first step is launching a lawsuit against one of the largest firms, Ocwen Financial Group, claiming it failed to live up to its agreements to collect payments on $82 billion worth of home loans.

Obviously other nonbanks and other investors are watching the outcome of the lawsuit against Ocwen Financial Group.  Unfortunately the government is signaling these changes against nonbank entities. Mortgage banking forms own by banks also have difficulty collecting mortgage payments however they for the most part easily meet the required net worth requirements.

Will these new net worth requirements improve the mortgage servicing requirements? 
I doubt it. 

Time will tell!

About The Author

Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter ( As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years. 

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