The share of mortgages backed by Fannie Mae and Freddie Mac that are originated or serviced by non-bank companies has risen sharply in the last five years.
Non-depository firms that are unaffiliated with commercial banks originated less than 10 percent of single-family loans purchased by Fannie and Freddie in 2010.
But there has been a dramatic shift in loan originations for the government-sponsored enterprises, with non-banks generating nearly half of GSE business in 2015.
Those details were provided by the Federal Housing Finance Agency Office of Inspector General in the report, FHFA’s Examinations Have Not Confirmed Compliance by One Enterprise with its Advisory Bulletins Regarding Risk Management of Nonbank Sellers and Servicers Evaluation.
A similar trend has been observed for the servicing of GSE
mortgages.
In 2010, non-banks serviced just 7 percent of all GSE residential loans.
Last year, non-bank share of GSE servicing soared to almost 35 percent.
The OIG noted that the increase in non-bank sellers and servicers has resulted in increased risk.
“Between 2012 and 2016, both the enterprises and their safety and soundness regulator, the Federal Housing Finance Agency, have acknowledged several risk factors associated with non-bank seller/servicers, including the lack of a federal prudential regulator, potential liquidity and financial strength issues and operational problems caused by rapid acquisitions of servicing portfolios and the higher costs associated with servicing delinquent loans,” the report stated.
The OIG recommends that FHFA conduct examination activities that are needed to determine whether GSE
risk management of non-bank seller-servicers FHFA’s supervisory expectations as expressed in its advisory bulletins.
FHFA agreed with the recommendation.
