The risk is especially high for servicers of Ginnie Mae securities, where nonbanks dominate - roughly 75 percent as of the end of June, according to the mortgage analytics company Recursion. In issuing the rule, the CFPB said that a “potentially historically high number of borrowers will seek assistance from their servicers at approximately the same time this fall, which could lead to delays and errors as servicers work to process a high volume of loss mitigation inquiries and applications.” Recently, the Consumer Financial Protection Bureau released a rule meant to ease stress on the system and protect some homeowners from foreclosure and usher them into loan modifications, but servicers have complained that such rules could increase compliance costs. “Some of these servicers are not prepared and haven’t been prepared financially for the wave of loan modification requests that are going to be inevitable at the end of the foreclosure moratorium,” said Chris Odinet, a law professor at the University of Iowa who has written about fintech and nonbank mortgage servicers. Mortgage servicers and other industry-watchers were on alert for these issues early in the pandemic, even unsuccessfully lobbying the Federal Reserve for a liquidity facility for nonbank mortgage servicers.Īnd though a widespread liquidity crisis reminiscent of the 2008 crisis now appears unlikely, experts are worried about logistical challenges with everything from high-touch transactions like loan modifications or foreclosures to a lack of infrastructure to service loans in foreclosure. These servicers, which handle the day-to-day managing of a mortgage, including foreclosures, have aggressively taken market share since the Great Recession and the regulation of bank mortgage lending that followed. The issue has to do with nonbank servicers that have never dealt with the number of loan modification requests and foreclosures that policymakers expect, and who aren’t required, like banks, to hold capital in reserve to offset the costs. As those programs come to a close this year, most homeowners that took advantage of coronavirus-era policies to delay their loans have now exited forbearance, staving off a widespread, 2008-style foreclosure crisis that many feared at the start of the pandemic.īut for a portion of borrowers - largely Black, Hispanic and first-time homeowners - the end of housing programs could pose significant difficulties. Homeowners had multiple options to buoy their finances, from refinancing opportunities to extra unemployment insurance and stimulus checks. That booming market has so far shielded a vulnerability. Tech-savvy millennials fled to the suburbs during the coronavirus pandemic, fueling a hot housing market that enabled nonbank and fintech mortgage companies to grab a big piece of the growing market share, churning out loans at a faster pace than more traditional bank lenders.
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