WASHINGTON — Two key Democrats are asking the Government Accountability Office to investigate the financial stability of nonbank mortgage servicers and potential harms to borrowers.
Rep. Elijah Cummings of Maryland, ranking member on the House Oversight Committee, and Sen. Elizabeth Warren of Massachusetts, a member of the Senate Banking Committee, sent a letter to the GAO on Monday raising concerns about the lack of capital requirements for nonbank servicers and the implications for consumers.
The request builds on growing worries about the rapid expansion of the nonbank servicing industry, as banks look to offload servicing rights to avoid further regulatory headaches. Cummings and Warren note in their letter that the non-bank share of the mortgage servicing market has grown by an estimated 300% between 2011 and 2013. The rise has also been associated with increased consumer complaints and a crackdown last winter by the Consumer Financial Protection Bureau on the largest nonbank servicer, Ocwen Financial.
"We are writing to request a study of the vulnerability of non-bank mortgage servicers to economic downturns given the lack of capital requirements applicable to these servicers and of the risks posed to consumers by continued growth in non-bank specialty mortgage servicing," they wrote to Gene Dodaro, comptroller general of the GAO.
Specifically, Cummings and Waters are requesting details about the overall risks to consumers by the growth of the nonbank servicer industry, the vulnerabilities that stem from the lack of capital requirements and the possible effects on both the industry and consumers if a major nonbank servicer were to fail.