CSBS Issues Model Prudential Standards for Nonbank Mortgage Servicers

The Conference of State Bank Supervisors (CSBS) recently issued the Final Model State Regulatory Prudential Standards for Nonbank Mortgage Servicers (Final Model Standards) to establish a uniform state policy for the supervision of covered nonbank mortgage servicers.

The Final Model Standards are subject to voluntary adoption by each state and do not constitute law, regulation, official guidance, or interpretation of any state agency where a state has not adopted such standards. The Final Model Standards are primarily grouped into two categories: (1) financial condition, and (2) corporate governance. The financial condition section generally covers the capital and liquidity requirements for covered institutions. Additionally, the corporate governance section includes the requirements for the board of directors, internal audits, external audits, and risk management.

With certain exceptions, the Final Model Standards generally apply to “nonbank mortgage servicers with portfolios of 2,000 or more 1-4 unit residential mortgage loans serviced or subserviced for others and operating in two or more states as of the most recent calendar year end, reported in the NMLS Mortgage Call Report.”  Under the Final Model Standards, note whole loans owned and loans being interim serviced prior to sale are not considered “residential mortgage loans serviced.” In addition, the Final Model Standards do not apply to not-for-profit mortgage servicers or housing finance agencies, and the financial condition requirements of the Final Model Standards do not apply to servicers solely owning and/or conducting reverse mortgage servicing or the reverse mortgage portfolio administered by forward mortgage servicers that may otherwise be covered. Moreover, the capital and liquidity requirements of the Final Model Standards have limited application to entities that only subservice for others.